Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

PETITION

S. G. Brown, Ltd., Watford

Mr. Raphael Tuck: With your permission, Mr. Speaker, and that of the House, I wish to present a Petition signed by employees, many of them highly-skilled technicians at S. G. Brown, Ltd., of Watford, makers of one of the finest gyroscopic compasses in the world, concerning the proposed closure of the S. G. Brown factory at Shakespeare Street, Watford.
The Petition says that the closure
. . would constitute a departure from the considerations laid down by Her Majesty's Government in 1959 as conditions precedent to the sale of the company by the Government.
In 1944, when the company was taken over by the Government, it was worth £55,000 and by 1959, after making profit after profit, it was worth £1¼ million. When the Conservative Government then proposed to denationalise the company, against a storm—

Mr. Speaker: Mr. Speaker: Order. The hon. Gentleman must submit his Petition briefly.

Mr. Tuck: With respect Mr. Speaker, when the Conservative Government proposed to denationalise the company, they gave an assurance that they would sell only to purchasers who could assure them of their ability to provide continuity employment of the same highly-skilled type.
Unfortunately, after it was denationalised, it made loss after loss. Now, the parent company of Hawker Siddeley proposes to close the factory at Shakespeare Street, Watford, and transfer the work to Lostock, where there is slack. The Petition says that the closure
… will cause widespread unemployment and deprive the nation of the valuable technical skills at present available in this industry.

It concludes:
Wherefore your Petitioners pray that the Honourable The Commons of Great Britain and Northern Ireland will use every effort to avert the said proposed closure, by renationalisation, by urging the Industrial Re-organisation Corporation to give aid or by using any other means deemed suitable. And your Petitioners, as in duty bound, will ever pray.

To lie upon the Table.

PRIVATE BUSINESS

TEESSIDE CORPORATION BILL

Lords Amendments considered and agreed to.

RYDE CORPORATION BILL [Lords]

SAINT MILDRED, BREAD STREET BILL [Lords]

As amended, considered; to be read the Third time.

NORTH EAST LINCOLNSHIRE WATER BILL (By Order)

Read the Third time and passed.

KIDDERMINSTER CORPORATION BILL [Lords] (By Order)

Read a Second time and committed.

GREATER LONDON COUNCIL (MONEY) BILL (By Order)

Second Reading deferred till Tuesday next.

Oral Answers to Questions — ORAL ANSWERS TO QUESTIONS

Sir G. Nabarro: On a point of order. Before we start Questions—

Mr. Speaker: Order. I should be grateful if the hon. Gentleman would raise his point of order at the end of Question Time.

Oral Answers to Questions — HOUSING

Mill Lane, Sandy (Planning Appeal)

Mr. Hastings: asked the Minister of Housing and Local Government why he rejected the recommendation of his inspector on the appeal by Galliford


Estates Limited with regard to the density of houses to be permitted on an overspill development at Mill Lane, Sandy.

The Joint Parliamentary Secretary to the Ministry of Housing and Local Government (Mr. Arthur Skeffington): It is essential to make the best use of building land, and my right hon. Friend was satisfied that an increase in density from six houses to 10 houses an acre would not prevent the establishment of a balanced community. The appeal was rejected because the site merited a high standard of design and the proposed housing layout was not of a quality which my right hon. Friend could endorse.

Mr. Hastings: Yes, but if the Minister wants to encourage overspill, as he presumably does, why, against his own inspector's advice, will be not pay attention to the considered views of the local authorities, both county and urban authorities, concerned? Is this not the way directly to discourage any other comparable small town from making a contribution of this kind?

Mr. Skeffington: The hon. Gentleman may not fully understand the planning processes—

Mr. Hastings: I understand them very well.

Mr. Skeffington: The original decision here, which was taken by the local authority, was then examined at a public inquiry. Certain recommendations were made by the inspector. It is then my right hon. Friend's duty to evaluate those recommendations and come to his conclusions. That is what he has done in this case.

Mr. Hastings: On a point of order. In view of the unsatisfactory nature of that reply, I beg to give notice that I will raise the matter on the Adjournment as soon as possible.

New Houses

Mr. Maddan: asked the Minister of Housing and Local Government what is his latest estimate of the number of new houses on which work will be begun during the course of 1969.

Mr. Graham Page: asked the Minister of Housing and Local Government

how many houses he now expects to be completed in the current year.

Mr. Costain: asked the Minister of Housing and Local Government what is his latest estimate of how the total of completed houses in 1969 will compare with the number of houses completed in 1968.

Mr. Maddan: asked the Minister of Housing and Local Government when he expects to announce a new house building target.

Mr. Frank Allaun: asked the Minister of Housing and Local Government (1) what is his latest estimate of the number of new houses on which work will be begun during the course of 1969;
(2) how many houses he now expects to be completed in the current year.

The Minister of Housing and Local Government (Mr. Anthony Greenwood): So far as a possible target is concerned, I have repeatedly made clear that I want to see the largest number of houses completed each year which economic circumstances will permit. The out-turn for 1969 will depend in large part on the success that the building societies have in attracting adequate mortgage finance. The results in the public sector in 1969 should not be very different from those in 1968. Overall, I do not expect any dramatic change in 1969 compared with 1968.

Mr. Maddan: Will the right hon. Gentleman give his latest estimate of the number of new houses on which work will begin during 1969?

Mr. Greenwood: No, Sir. The hon. Gentleman will be aware that it is unusual at this stage of the year to give a firm estimate of that kind. [HON. MEMBERS: "Answer."] I have made it perfectly clear that the outcome will be very much the same as last year. It will be about the same in the public sector, although it may be slightly down in the private sector.

Mr. Page: How can the right hon. Gentleman say that the outcome will be about the same as last year when the number of starts is so very much down compared with last year? Why is he ensuring that there will be so many fewer houses when the demand is growing so


greatly? Does not this state of affairs finally dispel any faith one might have had in the promises by which the Labour Party came to power?

Mr. Greenwood: No, Sir. It is true that the number of starts at the beginning of the year was a little disappointing, but there were a number of reasons for that. It was partly due to the weather, partly because of the effects of Ronan Point and partly because of the bunching of approvals in the last quarter.
Some local authorities are dragging their feet. If hon. Gentlemen opposite would encourage local authorities to spend less time on trying to sell land and houses and more on increasing their new house building programmes, the situation would be even more satisfactory.

Mr. Costain: Will not the Minister be frank with the House and admit that completions in the first quarter were 20 per cent. down and that mortgage advances were £70 million down on the same quarter of last year? Do not these figures indicate that we will not reach 400,000 new houses, let alone the 500,000 promised by hon. Gentlemen opposite at the last General Election?

Mr. Greenwood: I know that the hon. Gentleman, like so many of his hon. Friends, is longing to take a gloomy view of the situation. The statistics do not confirm what they say, although, as I have said, it is too early in the year to be precise. The House will remember the bitter opposition from hon. Gentlemen opposite when building societies increased their interest rate to make more money available for the building of private houses.

Mr. Allaun: What do the Government intend to do to stop Conservative-controlled councils from cutting down the number of houses being built? As I do not share the optimistic view of my right hon. Friend in this matter, may I ask him to say what additional emergency measures he intends to take in the private sector to ensure that the feared fall in the number of houses being built does not materialise this year and next year?

Mr. Greenwood: In the private sector everything depends on there being an adequate inflow of money to the building societies. The latest statements from the building societies show that the reaction

to the interest rate increase has been rather more encouraging than might at first have seemed. The public sector is a matter which is the direct responsibility of the local authorities concerned; and no doubt my hon. Friends and members of the public will know exactly what action to take in this respect.

Mr. Blenkinsop: Is my right hon. Friend aware that many thousands of families living in houses thank the Lord that we do not have a Tory Government?

Mr. Peter Walker: Since the Minister is blaming everybody except the Government for the terrible decline in the house building programme, would not the right hon. Gentleman agree that as the Prime Minister made a firm pledge that the Government would build 500,000 houses a year by 1970 no matter what the circumstances, it would be appropriate for the Prime Minister to explain to the House why that pledge is being broken?

Mr. Greenwood: Once again, the hon. Gentleman is somewhat out of date. [HON. MEMBERS: "Answer."] Although I enjoy listening to him regurgitating those old speeches, I am sure that he knows that a statement was made in the House in January, 1968, emphasising that the 500,000 target could not be reached because of devaluation. I repeat what I said earlier; that I do not see any drastic change in the situation this year.
The answer to the supplementary question asked by my hon. Friend the Member for South Shields (Mr. Blenkinsop) is that by the end of this year 2 million houses will have been completed since the Labour Party came to power.

Mr. Speed: asked the Minister of Housing and Local Government what recent evidence he has received from the Federation of Registered Housebuilders regarding the expected state of trade in 1969; and what action he proposes to take in the light of that evidence.

Mr. Greenwood: On 24th March, the Federation of Registered Housebuilders stated that their February, 1969, State of Trade Inquiry made it seem likely that no more houses would be started or completed in the private sector in 1969 than in 1968. I have regular discussions with the builders, building societies and local authorities about housing prospects, when


this and other evidence is brought under review.

Mr. Speed: Does the right hon. Gentleman expect the number of private house completions this year to exceed the 1964 figure?

Mr. Greenwood: The hon. Gentleman cannot have been here when we discussed this earlier at Question Time.

Mr. Speed: I was.

Mr. Greenwood: The point about the house Federation's inquiry is that it took place before the increase in building society interest rates and the situation has changed since then. This afternoon I am holding talks with the building societies, the builders and the local authorities, when I shall be in a position better to evaluate the results of the survey conducted in February.

Direct Labour Department (Hammersmith)

Mr. Costain: asked the Minister of Housing and Local Government what report he has received from the District Auditor of the Metropolitan District regarding overspending on housing schemes in 1967–68 by the direct labour department of the London Borough of Hammersmith; and whether he will make a statement.

The Joint Parliamentary Secretary to the Ministry of Housing and Local Government (Mr. James MacColl): In his interim report to the council on its 1966–67 accounts, the district auditor listed five schemes undertaken by the council's building department which had resulted in overspending during 1967–68. One scheme was for an old people's home; the rest for housing. Of these four schemes, three still showed savings compared with the next lowest tender. The fifth scheme was an ingenious, but untested, high density development which was authorised as a pilot scheme.

Mr. Costain: Will not the Minister admit that this shows further expenditure totalling about £83,000? Would it not be wise to revise Circular 50/66 in relation to the whole question of instructions governing direct labour for local authorities?

Mr. MacColl: The former Hammersmith council took immediate steps to

obtain advice on how to improve its direct labour department. Unfortunately the present council has not followed that advice and is not taking any steps to improve the department.

Leasehold Reform Act

Mr. Barnes: asked the Minister of Housing and Local Government whether he is satisfied with the speed at which the machinery set up under the Leasehold Reform Act to enable leaseholders to acquire their freeholds is now working; and if he will make a statement.

Mr. MacColl: As my hon. Friend will be aware, most cases are settled by agreement, between the parties. If there are delays in the handling of cases before the Lands Tribunal, I will gladly look into them, and if my hon. Friend has evidence of unwarrantable delays, I should be glad to have particulars.

Mr. Barnes: Is my hon. Friend aware that many leaseholders are being told by their solicitors that it might take years for their cases to come before the Lands Tribunal and when they come before it they will probably gain very little because of the way decisions by the Tribunal appear to be going? Could he say why the Act does not appear to treat leasholders as favourably as it was originally claimed it would?

Mr. McColl: There have been only two decisions so far. As I have said in answer to my hon. Friend, if he will produce particular cases in which there is delay my right hon. Friend will certainly see what he can do to improve the position.

Mr. Roy Hughes: Does my hon. Friend appreciate that there is much dissatisfaction with the operation of this Act in Wales and that many leaseholders are reluctant to go to the Lands Tribunal because recent decisions tend to give the impression that the dice is loaded in favour of the freeholder? Therefore, will he take an early opportunity to amend the Act and to introduce proposals to swing the balance back in favour of the leaseholder?

Mr. McColl: My right hon. Friend is aware of the feeling on this matter. He is looking into it to see if anything, and what, could be done to improve the position.

New Towns (House Purchase)

Mr. Allason: asked the Minister of Housing and Local Government what progress has been made towards the goal of 50 per cent. owner-occupation in new towns.

The Minister for Planning and Land (Mr. Kenneth Robinson): I would refer the hon. Member to the reply I gave him on 24th April. As far as new building is concerned, builders are showing an increasing interest in the opportunities offered in new towns.—[Vol. 782, c. 120–21.]

Mr. Allason: Does the Minister realise that in London new towns, apart from Bracknell where 100 per cent. of the rented houses are available for sale, only 6 per cent. in the remaining new town are available for sale? How can he achieve 50 per cent. home ownership if only 6 per cent. are available for sale?

Mr. Robinson: As the hon. Member knows, this is a relatively new policy and London new towns for the most part were first generation new towns. They are anxious to move in the direction that the policy announcement indicates and the question of sale of their houses is under discussion between them and the Department.

Greater London Council Houses (Rents)

Mr. Rossi: asked the Minister of Housing and Local Government what representations have been made to him by the Greater London Council on the effect on London ratepayers of his decision to reject the council's proposals for altering the structure of council house rents; and what reply he has sent.

Mr. Greenwood: On 24th April the council sent me a letter, advancing a number of arguments and asking for a meeting to discuss them. I have arranged to meet the council next week.

Mr. Rossi: I am grateful for that reply. Is the right hon. Gentleman prepared to allow the local authority to proceed according to the mandate it has received from the people who elected it?

Mr. Greenwood: I have to operate within the terms of the Prices and Incomes Act which give me power to intervene in cases of this kind. I proposed a

method of dealing with the situation facing the G.L.C. which I believed would avoid rent increases.

Mr. Frederic Harris: Is it not grossly unfair to ratepayers in Croydon, who were pushed into London, that they have to pay more rates to the G.L.C. merely because economic rents are not being charged by the G.L.C.?

Mr. Greenwood: Croydon ratepayers were pushed into London by the Conservative Government. There is no question of an increased burden on the rates. I suggested to the G.L.C. that a greater amount of capital expenditure should be charged to loan. At the moment, the proportion of G.L.C. expenditure which is met from revenue is exceptionally high. I am absolutely convinced that the method which I have proposed to the G.L.C. will avoid both an increase in rents and any burden on the ratepayers.

Mr. Whitaker: Did not a report yesterday show that for many years Kensington Council has failed to discharge its housing responsibilities for Notting Hill? Therefore, is not central Government initiative essential, and should not a much more comprehensive attack be made on the problems of urban renewal?

Mr. Greenwood: My hon. Friend will agree that that goes very wide of the Question.

Mr. Peter Walker: Does the right hon. Gentleman suggest to the G.L.C. that rent increases should be deferred and that loans should be taken at what would be, as a result of Government policy, a penal rate of interest?

Mr. Greenwood: That is one of the propositions which have been put to the House in the past and which has been approved by the House. In this case, it is open to the council to decide which course to adopt in order to avoid rent increases. If it decides to put up the rates, unnecesarily in my view, that is its decision and not mine.

Subsidies and Costs

Sir B. Rhys Williams: asked the Minister of Housing and Local Government (1) what is the subsidy available to a head of household earning £22 a week and buying his house through the option mortgage scheme; and what is


the average subsidy provided in respect of an average family with the same income in a newly built council house, expressed in weekly terms;
(2) what is the annual total outgoing required to service the cost of the average new council house; and what proportions of it are met at current interest rates by, respectively, the Exchequer, the tenant, the contribution from rates and the profit accruing from letting older properties.

Mr. MacColl: It is impossible to give a valid comparison between the two subsidies in the terms laid out by the hon. Member because the Question starts from an erroneous assumption, that Exchequer subsidy is calculated on the householder's income. For a general assessment of the relative cost, both on average and in total, of housing subsidy and mortgage interest relief, I would refer him to the two replies given by my right hon. Friend the Minister for Planning and Land on 20th December last to my hon. Friend the Member for Manchester, Wythenshawe (Mr. Alfred Morris).—[Vol. 775, c. 510–11.]

Sir B. Rhys Williams: Would it not be better to subsidise the families and not the houses? Does this way of spending public money provide a fair basis of competition with private enterprise?

Mr. MacColl: My right hon. Friend has always encouraged, and continues to encourage, local authorities to use their subsidy by a rebate scheme to help families who need assistance most.

Land

Mr. Allason: asked the Minister of Housing and Local Government how many acres of land have been sold for housing by the Land Commission; and what was the average price per acre.

Mr. K. Robinson: 2·2 acres; £13,423.

Mr. Allason: Does that include the case at Mudeford, near Christchurch, where 1½ acres were sold for £48,000? Is the Minister satisfied that the Land Commission is providing land for housing at reasonable costs, which was promised as a result of the Land Commission Act?

Mr. Robinson: According to my list, the site to which the hon. Gentleman

referred is not included. I am well satisfied that when the acquisition and sale policy gets into its stride, which I hope will be in the current year, the Land Commission will be able to provide land for housing at reasonable prices.

Mr. Graham Page: But the Commission has been in operation for just over two years. The great justification for it was that it would bring forward land for housing. It has brought forward only 2·2 acres over two years. Is it not time to abolish it?

Mr. Robinson: The hon. Gentleman, with his political and professional experience, knows perfectly well that land acquisition is a very long-winded process. Furthermore, the reason why the start has been slower than we hoped has been explained on a number of occasions by me in our many recent debates on the Land Commission.

Council House Programme, Sevenoaks

Sir J. Rodgers: asked the Minister of Housing and Local Government what were the reasons which led him to curtail the size of the council housing programme of the Sevenoaks Rural District Council.

Mr. MacColl: The Council was allowed to proceed with its programme after it had fully explained the case for two additional schemes.

Sir J. Rodgers: Is the hon. Gentleman aware that there is a great shortage of land for building purposes since most of the area available to the local council is in the Metropolitan green belt? Will he use his good offices with the G.L.C., which has 800 houses in the area, to see whether, when any of these houses fall vacant, they cannot be given to people who have grown up on the G.L.C. estate and have then got married instead of these people having to go on the rural district council's housing list?

Mr. MacColl: I know that there are problems in relation to the overspill, but I am sure that the G.L.C. and the local authority will co-operate. My right hon. Friend will do his best to facilitate such co-operation.

Oral Answers to Questions — LOCAL GOVERNMENT

Planning Policy (South-East)

Mr. Hastings: asked the Minister of Housing and Local Government whether he will make a statement on future planning policy in the South-East.

Mr. K. Robinson: This must await completion of the comprehensive planning study of the South-East now being undertaken by a joint central and local government team led by the Ministry's chief planner.

Mr. Hastings: Is it not discouraging to those who worked so hard to produce the South-East Study to find that there is to be this further delay? Will it now be possible to have a co-ordinated study of the South-East before a decision is made about the siting of a third London Airport either at Foulness or at an inland site?

Mr. Robinson: The answer to the first part of the hon. Gentleman's supplementary question is that it was generally agreed that this further study was necessary. I hope that it will be completed by the spring of next year.
The answer to the second part is that all considerations concerning a third London airport will be taken into account by those conducting the study. I do not believe that this problem in any way invalidates their work.

Mr. Gwilym Roberts: Does my right hon. Friend appreciate the urgency of this matter in view of the complex housing, industrial, airport and other problems which are becoming ever more pressing in this part of the country?

Mr. Robinson: Yes, Sir. We recognise the urgency of the matter, but it is most important to get the right answers. For this reason a team has been appointed; and it is getting on with the job as fast as possible.

Rent Reorganisation schemes

Mr. Murton: asked the Minister of Housing and Local Government if he will list in the OFFICIAL REPORT those local authorities whose proposed rent reorganisation schemes have been rejected by him.

Mr. K. Robinson: Under the Prices and Incomes Act, 1968, 172 local authorities have submitted 183 proposals for rent increases to which my right hon. Friend has been unable to agree. I will, with permission, circulate a list in the OFFICIAL REPORT.

Mr. Murton: I am delighted that the right hon. Gentleman intends to publish the list. Would he agree that it will give ratepayers fair warning that the only alternative to reorganised rent schemes is the inevitability of higher rates next year?

Mr. Robinson: No, Sir. I emphatically reject that suggestion. [Interruption.] Most of the authorities had obvious scope for breaking down balances or, in a few cases, for restricting capital expenditure to revenue. Except in a few cases, we have not expected authorities to increase their rate fund contributions. We have done so only where there was no other way of keeping their rent increases within the limits set by the Prices and Incomes Board.

Greater London Council



County Boroughs
Darwen.


Bath.
Devizes.


Blackburn.
Dorchester.


Gateshead.
Dover.


Leeds.
Durham.


Leicester.
Eastleigh.


Liverpool.
Ellesmere Port


Manchester.
Falmouth.


Norwich.
Folkestone.


Southend.
Gravesend.


Wallasey.
Kidderminster.


Warrington.
Launceston.


London Boroughs
Leamington Spa.


Bromley.
Leigh.


Enfield.
Macclesfield.


Haringey.
Newbury.


Hillingdon.
New Sarum.


Kensington and Chelsea.
New Windsor.



Nuneaton.


Lambeth.
Penzance.


Merton.
Pontefract.


Westminster.
Rochester.


Boroughs
Stalybridge.


Andover.
Spenborough.


Appleby.
Stourbridge.


Barnstaple.
Thetford.


Bodmin.
Wokingham.


Boston.
Urban Districts


Brackley.
Aldridge-Brown-hills.


Calne.



Chichester.
Audenshaw.


Chipping Norton.
Bicester.


Christchurch.
Biddulph.


Colne.
Bingley.


Crewe.
Bourne.


Crosby.
Bradford-on-Avon.

Urban Districts—cont.
Brixworth.


Brandon and Byshottles.
Buckingham.



Bullingdon.


Chesham.
Calne and Chippenham.


Coalville.



Dalton-in-Furness.
Chanctonbury.


Darton.
Chesterfield.


Dawlish.
Chorley.


Denton.
Cockermouth.


East Grinstead.
Darlington.


Formby.
Daventry.


Fulwood.
Docking.


Gosforth.
Downham.


Heanor.
Elham.


Hitchin.
Epping and Ongar.


Ince-in-Makerfield.
Erpingham.


Leighton-Linslade.
Forehoe and Henstead.


Leyland.



Littleborough.
Fylde.


Littlehampton.
Godstons.


Meltham.
Guildford.


Newport Pagnell.
Kirkbymoorside.


Norton-Radstock.
Launceston.


Otley.
Ledbury.


Portslade.
Leominster and Wigmore.


Rainford.



Redditch.
Lichfield.


Shoreham-by-Sea.
Liskeard.


Spalding.
Macclesfield.


Stocksbridge.
Malling.


Sutton-in-Ashfield.
Marlborough and Ramsey.


Swaffham.



Teignmouth.
Mildenhall.


Thame.
Nantwich.


Trowbridge.
Newark.


Turton.
Newbury.


Ventnor.
Newton Abbot.


Wellingborough.
Norman Cross.


Wellington (Salop).
North Cotswold.


Welwyn Garden City.
North Kesteven.



North Shropshire.


Whickham.
Pickering.


Whitstable.
Romsey and Stockbridge.


Wimborne Minster.



Wirral.
St. Ives (Hunts.).


Woking.
Sodbury.


Rural Districts
South East Derbyshire.


Alsfon with Garrigill.




South Kesteven.


Axminster.
Southwell.


Aysgarth.
Stokesley.


Barnstaple.
Strood.


Barrow-upon-Soar.
Tadcaster.


Battle.
Torrinston.


Blackwell.
Watford.


Blofield and Flegg.
Wharfedale.


Bradfield.
Winchester.


Bridgnorth.
Yeovil.

Refuse Disposal

Mr. Gwilym Roberts: asked the Minister of Housing and Local Government if he will take steps to set up a National Refuse Corporation aimed at co-ordinating the recovery of household refuse, rubber tyres, scrap, mining tips, and other forms of refuse; and what studies have been made of the uses of various forms of refuse and the economies to be achieved by their recovery.

Mr. Skeffington: I will send my hon. Friend available information about past studies. The working party on refuse disposal, which my right hon. Friend set up in 1967, is now making a broad study which covers the question of recovery. In the meantime I do not think that the setting up of a centralised body in this field is desirable.

Mr. Roberts: Would not my hon. Friend agree that the present haphazard method of collecting industrial and household refuse is a national scandal? Is he aware that if waste were collected and retrieved on an organised national scale there would be a saving of many millions of £s to the economy?

Mr. Skeffington: I am well aware that considerable improvement could and should be made in many parts of the country. For this reason my right hon. Friend has set up a working party.

Sir Knox Cunningham: Is the hon. Gentleman's right hon. Friend opposed to dustmen selling direct?

Royal Commission on Local Government in England

Mr. Lubbock: asked the Minister of Housing and Local Government when the Report of the Royal Commission on Local Government in England will be published.

Mr. Greenwood: I understand that the Commission's Report will be published soon after Whitsun.

Mr. Lubbock: Is the right hon. Gentleman aware that reports are appearing with great regularity in the Press purporting to describe what is in the Maud Committee's Report? Considering the embarrassment that this must be causing to his Ministry, will he take steps with the Stationery Office to expedite the printing of the Report so that we shall know what is actually in it and not what is alleged to be in it?

Mr. Greenwood: I share the anxiety of the hon. Member about the reports which may or may not be correct, which I know create an atmosphere of uncertainty. The actual machinery for publication of the Report is under the direction of the Royal Commission itself. We have emphasised to the Stationery Office the


need for ensuring that there is no unnecessary delay in publication. I believe that immediately after Whitsuntide is the earliest date when this will be possible.

Multi-Occupied Houses (Fire Risks)

Miss Lestor: asked the Minister of Housing and Local Government whether he is satisfied that local authorities are fully using the powers given to them by his Regulations to avoid fire risk in houses in multiple occupation; and if he will make a statement.

Mr. MacColl: I believe that local authorities in general make good use where necessary of their powers to require means of escape in multi-occupied houses. Provisions in the Housing Bill will add to these powers and make it the duty of local authorities to inspect their districts to see whether action is necessary. I will gladly consider carefully any cases of which my hon. Friend may know where it appears that effective use of the powers is not being made.

Miss Lestor: May I thank my hon. Friend for that reply and say how pleased I am that this matter is being looked into? Does my hon. Friend agree that we cannot afford to be complacent about it? Is not one of the things which need attention, particularly in houses in multiple occupation, the inappropriate means of heating often used that cause some of these fires and the lack of means of escape, as we know by the deaths of children and people who cannot jump to get out of a building? Is this not a matter that needs looking into?

Mr. MacColl: The Housing Bill deals with means of escape from fire. On the general question of fire protection, my right hon. Friend the Home Secretary has a working party looking into this matter.

Sir G. Nabarro: Does the hon. Gentleman recall that in 1960 a number of children were burned to death because of faulty oil heaters at Ware in Hertfordshire, and that there was an exact reproduction of that case in Birmingham in the week before last when a number of children were burned to death due to a faulty oil heater? Is not amending legislation required to raise standards of

efficiency for all portable and mobile heaters used in multi-occupied houses?

Mr. Manuel: Any houses.

Mr. MacColl: I have sympathy with what the hon. Member has said. As to the immediate Housing Bill, which is the responsibility of the Minister, means of escape from fire are being considered to see whether they can be improved, especially in regard to enforcement and inspection.

Mexborough and Swinton (Swimming Baths)

Mr. Edwin Wainwright: asked the Minister of Housing and Local Government, in view of the fact that there are no swimming facilities for the children in the Mexborough and Swinton Urban District Council's areas, if he will make a financial grant to both these authorities so that swimming baths can be provided.

Mr. Skeffington: This type of expenditure attracts rate support grant. My right hon. Friend has no power to make a specific grant.

Mr. Wainwright: Does not my hon. Friend realise that a great many lives are lost, especially in summertime, because children are not able to swim? Is he aware not only that these two local authorities cannot provide facilities, but that neither can many others? Will he do something to make sure that close to their homes children have facilities to learn to swim?

Mr. Skeffington: There are a large number of schemes coming forward all the time for the provision of swimming baths, and permission is being given for these as rapidly as possible in accordance with the resources available. If the officials of the two authorities mentioned by my hon. Friend would like to consult my Department, we would be pleased to help in any way we can.

Valuation Practices

Mr. Iremonger: asked the Minister of Housing and Local Government whether, in view of the obiter dicta in the Court of Appeal in the case of Young versus Greater London Council, he will send a circular to dissuade local authorities which use their own employees for


valuing property which they acquire compulsorily from presenting evidence to the courts in such a way as to minimise the compensation payable; and if he will seek powers to control the valuation practices of local authorities.

Mr. K. Robinson: No, Sir.

Mr. Iremonger: Has the right hon. Gentleman not read the judgment and seen that this Machiavellian intrigue was described by Lord Justice Russell as having as its sole purpose to ensure that private citizens should secure the minimum compensation possible?

Mr. Robinson: It is not the first time that the hon. Member has sought under the cloak of Parliamentary privilege to question the professional integrity of the Greater London Council's valuers. I have read the account of the case and it is certainly my view, whatever the hon. Member may say, that it is not at all clear that the court found any fault with the council's actions. The court found in favour of the council.

Mr. Iremonger: On a point of order. In view of the unsatisfactory nature of the reply, I beg to give notice that I shall raise the matter on the Adjournment.

Bessacarr Caravan Company (Buildings)

Mr. Edwin Wainwright: asked the Minister of Housing and Local Government if, in view of the high rate of unemployment in the Mexborough Employment Exchange Area, he will reconsider his decision not to grant planning permission to the Bessacarr Caravans Company to erect additional buildings which are required for the completion and the storage of caravans, which are being built for exports.

Mr. MacColl: My right hon. Friend has no power to change a decision on an appeal once it is issued.

Mr. Wainwright: Does my hon. Friend realise that that decision was one of the most foolish I have ever known? Is he aware that this area is an old coal-mine tip and that this company wanted to erect buildings to provide accommodation for its completed caravans, which would not mean any additional area for the company? Will he have another look at the problem, as there is high unemploy-

ment in the area and something must be done in a matter of this kind?

Mr. MacColl: I know that many planning decisions create a feeling of hardship and difficulty for the people concerned, but my right hon. Friend has a duty to consider the findings of the report of his inspector and to come to a decision which he thinks right.

Betterment Levy

Mr. Clegg: asked the Minister of Housing and Local Government what plans he now has for exercising his powers under the Land Commission Act, 1967, for exempting certain transactions from the betterment levy.

Mr. Rossi: asked the Minister of Housing and Local Government what consultations he has had with the Chairman of the Land Commission about changes in the operation of the betterment levy; and what has been the result of the discussions.

Mr. Kitson: asked the Minister of Housing and Local Government whether he will take steps to ensure that betterment levy is not payable in cases where no actual profits have been made.

Mr. Biggs-Davison: asked the Minister of Housing and Local Government whether he will declare a moratorium, by legislation or otherwise, on the payment of betterment levy under the Land Commission Act.

Mr. K. Robinson: The Government's proposals for modifications to the betterment levy were set out in the White Paper published on 15th April and proposals for legislation are included in the Finance Bill.

Mr. Clegg: That is not an unexpected reply. Would the Minister note that, unless he makes the concession retrospective, he will leave a legacy of bitterness among those suffering under the Act?

Mr. Robinson: I dealt with this matter, as far as I was able to make myself heard, in the debate on 28th April.

Mr. Rossi: Does the right hon. Gentleman agree or disagree with Sir Henry Wells, the Chairman of the Land Commission, that it is possible administratively to pay back to people what has


wrongly been taken from them under a totally bad law?

Mr. Robinson: That is not what Sir Henry Wells said. All that he said was that, as far as the Land Commission was concerned, although there would be administrative difficulties, they would not be insuperable. But it is not the question of administrative difficulties which has led to the Government's decision, nor are the difficulties confined to the Commission. There are even more serious administrative difficulties for the Inland Revenue.

Mr. Kitson: Is the Minister aware that he has not satisfactorily answered my Question? Is it not absolutely absurd to charge a betterment levy when no profits have been taken?

Mr. Robinson: No; it would be much more profitable to discuss these matters in detail, as we shall soon have the opportunity of doing, on the Finance Bill.

Mr. Biggs-Davison: Have not the Government's concessions created new injustices? Therefore, will the Government suspend the levy retrospectively until a Conservative Administration, pledged to its abolition, can clear up the mess?

Mr. Robinson: No, Sir.

Mr. Spriggs: Is my right hon. Friend aware that we believe that he should give careful consideration to certain cases, especially when it has taken a long time to obtain planning permission? I am thinking of a case in which planning permission took two years. The betterment levy has been charged since the Act came into force. Would my right hon. Friend have another look at cases like the one I have in mind?

Mr. Robinson: I have looked at one or two cases like that. Whether I have looked at the one to which my hon. Friend refers, I am not sure. If he would write to me about it, I will consider it.

Direct Labour Departments (Report)

Mr. Murton: asked the Minister of Housing and Local Government whether he has yet received the Lloyd Thomas report on financial and management con-

trol in local authority direct labour departments; and when he proposes to publish it.

Mr. Greenwood: I have received the report and a meeting has been arranged with the local authority associations to discuss arrangements for publication.
I should like to take this opportunity of thanking the members of the working party for their services.

Mr. Murton: Why did the Minister find it necessary in 1965 to abolish restraints on direct labour and two-and-a-half years later form a working party to try to make direct labour more efficient? Does he recollect that on 18th February he said that the report would be ready within a matter of weeks? Eleven weeks have elapsed and the House is still awaiting it?

Mr. Greenwood: Eleven weeks is a matter of weeks. I was not Minister of Housing and Local Government in 1965. When a matter is the subject of public debate, it is right that informed opinion should be available so that members of the public can make up their minds. I am a strong believer in direct labour departments, but I believe it essential that they should operate at the maximum pitch of efficiency.

Dr. Gray: I congratulate my right hon. Friend on criticising the Great Yarmouth County Borough Council for turning down the lowest tender which came from its direct labour department and choosing a private contractor in its place. Will he send instructions to all councils throughout the country to ensure that this kind of thing does not happen and he is not forced to intervene in this way in many other places?

Mr. Greenwood: My hon. Friend will understand that I have not power to do as he wishes, but I have no doubt that what he has said will be widely noted.

District Heating Schemes

Mr. Gwilym Roberts: asked the Minister of Housing and Local Government if he will circulate local authorities and new town corporations on the use of district heating schemes to cover whole towns or large sections of towns and advise these authorities on the use of household refuse as a major fuel for such district heating schemes.

Mr. MacColl: The Departments concerned are currently examining the future possibilities of district heating, including the use of refuse as a fuel particularly in the context of major new developments. At present, therefore, my right hon. Friend is not in a position to issue general guidance on the subject.

Mr. Roberts: Will my hon. Friend urgently consider what further steps could be taken, in conjunction with the Ministry of Power, to encourage district heating in general and district heating based on refuse in particular? Will he at least ensure that new town authorities introduce district heating schemes based on some type of refuse usage?

Mr. MacColl: The possibility of using district heating schemes at Milton Keynes and Northampton will be considered by my Department and the corporation.

Mr. Lubbock: Is the hon. Gentleman aware that a large number of local authorities are introducing provisions to give themselves power for district heating in Private Bills during the present Session and that there will probably be an even bigger queue next year? Will he consider introducing national legislation so that we can have a uniform framework for adequate protection of the rights of the consumer?

Mr. MacColl: The attitude of the House towards this legislation and the experience under it if it is passed will be valuable assistance in achieving effective national legislation.

Land Commission

Mr. Goodhew: asked the Minister of Housing and Local Government what representations have been made to him to the latest convenient date about the operation of the Land Commission; and what reply he has sent.

Mr. K. Robinson: I have had a number of representations from hon. Members and from the general public, to which I have sent appropriate replies. There have been seven debates on the Land Commission this year and a White Paper was issued on 15th April on "Modifications in Betterment Levy".

Mr. Goodhew: Since the right hon. Gentleman has acknowledged that this is a very unjust business, why is he being

so "wet" about it now? Why not be as strong as the Secretary of State for Social Services was yesterday when he faced the facts of the situation and went back on previous policy? Will the right hon. Gentleman not indulge in some retrospective legislation in this case?

Mr. Robinson: Since I have not acknowledged what the hon. Gentleman has alleged that I have acknowledged, the second part of his supplementary question regarding my humidity does not therefore arise.

Mr. Hooley: Is my right hon. Friend aware that attempts to abate levies and taxation on totally unearned increments of wealth and property of this kind would be unwelcome to this side of the House?

Beaches (Removal of Sand)

Mr. Milne: asked the Minister of Housing and Local Government what action he intends taking to assist the Civic Trust, local authorities and other bodies in their efforts to prevent the spoilation of beaches by the removal of sand.

Mr. Sheffington: The Coast Protection Act enables maritime local authorities to submit for my right hon. Friend's confirmation orders prohibiting the excavation of materials from the seashore to protect the coast against sea erosion. In addition, the removal of sand from a beach without planning permission constitutes an offence. These powers appear adequate and it is not thought that further special action is requires.

Mr. Milne: Is my hon. Friend aware that the private ownership of some beaches in Northumberland is leading to the removal of an excessive amount of earth and sand? It is no use letting this situation go on at the same time as the Government are paying grants to beautify the area.

Mr. Skeffington: This is the sort of case where the local authority will have considered a revocation order. If my hon. Friend will get in touch with us about this we shall be glad to give such advice as we can.

Mr. Thorpe: In view of the consideration raised by the hon. Member for Blyth (Mr. Milne), and other equally vital considerations, is there not a strong case for seeing that all beaches, whether at high


or low water mark, are brought into public ownership?

Mr. Skeffington: There is a case for moving along the lines of the suggestion by the right hon. Member for Devon, North (Mr. Thorpe). In fact, this was part, although only part, of the matters investigated by the Maritime Conference.

Oral Answers to Questions — EDUCATION AND SCIENCE (SECRETARY OF STATE'S SPEECH)

Mr. Evelyn King: asked the Prime Minister whether the public speech of the Secretary of State for Education and Science on education policies delivered to the National Union of Teachers on Tuesday, 8th April represents the policy of Her Majesty's Government.

Mr. Christopher Price: asked the Prime Minister whether the public speech of the Secretary of State for Education and Science on education policies to the National Union of Teachers at Douglas on 8th April represents the policy of Her Majesty's Government.

The Prime Minister (Mr. Harold Wilson): As I have already said in reply to a Question by the hon. Member for Mid-Bedfordshire (Mr. Hastings) on 1st May, "Yes, Sir".—[Vol. 782, c. 274.]

Mr. King: When the Secretary of State describes the expression of quite moderate opinion by eminent thinkers such as Kingsley Amis and the Warden of All Souls' as the "blackest day in education for 100 years", does not this sound a little unbalanced? Does the Prime Minister think that intellectual argument is assisted by Ministerial hysterics of that kind?

The Prime Minister: What the hon. Gentleman regards as a moderate statement and what the rest of us regard as moderate are not exactly the same. The paper which was castigated by my right hon. Friend is a document calling into question all the advances in education policy—[Interruption.]

Mr. Speaker: Order. This is on an educational topic.

The Prime Minister: —carried through right hon. Friend with the support Front Bench opposite, and if the

hon. Member for Dorset, South (Mr. King) does not agree with those advances the fault obviously lies in him.

Mr. Price: Is my right hon. Friend aware that the Opposition are so split and squabbling—[Interruption.]

Mr. Speaker: Order. Back to education, please.

Mr. Price: Is my right hon. Friend aware that the split in the Opposition is so serious on this issue that it would be a disaster if they were ever to have responsibility for education again? Is he further aware that so far from these being moderate opinions in the "black paper", they would undo all the solid progress made in education since the war?

The Prime Minister: I agree. I think that perhaps the reason why the Opposition have not had one or two little local problems such as we have had in the last few days is that they are a one-man band—and he sits on the back benches giving his orders to the Front Bench. I am not clear, in relation to education policy, whether the Front Bench opposite agree with this so called "black paper". If they do, they could take an early Supply Day, give us their views, set them against ours and let us have a confrontation on it.

Mr. Longden: Why does the Prime Minister describe these as advances in education when every reasonable and balanced person, whether or not they agree with them, knows that they are experiments in education, which have yet to be proved?

The Prime Minister: Because I totally reject, as my right hon. Friend did in the speech which is the subject of this Question, the attitudes and arguments used in in this so-called "black paper" about the whole liberal progress in education, carried forward for over 20 years now. Incidentally, the right hon. Member for Birmingham, Handsworth (Sir E. Boyle) and the right hon. and learned Member for St. Marylebone (Mr. Hogg) made their contributions to this. I reject totally the reactionary character of this paper which appears to be supported by some back benchers opposite. Whether it is supported by the Front Bench opposite, I suppose we shall never know.

Mr. Simon Mahon: Is my right hon. Friend aware that speeches of his right hon. Friend in another context in recent days, namely, those relating to voluntary schools and religious education in schools, have been much appreciated in many parts of the country? May we take it from the Prime Minister that this is to be the continuing policy of the Government?

The Prime Minister: As my right hon. Friend has made clear, there is to be no change in the policy, either as regards the present position, which has been agreed by all parties, of voluntary schools or about the position of religious education in the school system as a whole.

Mr. Heath: The Prime Minister once declared in a famous phrase on a great occasion that the grammar schools would be abolished over his dead body. Does he realise, amidst his "little local difficulties", that it is the Secretary of State for Education and Science who holds the assassin's dagger?

The Prime Minister: If there was one thing which was predictable it was that we would get that supplementary question and the right hon. Gentleman has been anticipated by 36 of his brighter back benchers in putting it on the Order Paper. The answer is that, at the time I said that what we shall do—[HON. MEMBERS: "Oh."] The right hon. Gentleman is talking about what I said in 1963. I said that what we shall do is to extend—[Interruption.]—grammar school education—

Mr. Speaker: Order. Hon Gentlemen must listen to each other.

The Prime Minister: At that time I said what we shall do is to extend grammar school education to everyone, through the comprehensive system. [HON. MEMBERS: "Oh."] If the right hon. Gentleman's policy is to maintain 11-plus selection, let him get up and say so.

Mr. Shinwell: Is my right hon. Friend aware that when I listen to the other side I wonder what is the use of education?

The Prime Minister: My right hon. Friend is entitled to wonder. What we are concerned to do is to get a system of education for everyone, not on the basis of future Cabinets half of whom went to one single school.

Hon. Members: Cheap.

Mr. Speaker: Noise wastes valuable Question time.

Mr. King: On a point of order. In view of the unsatisfactory nature of the Prime Minister's wriggle, I beg to give notice that I shall seek leave to raise this matter on the Adjournment at the earliest opportunity.

Oral Answers to Questions — PARIS (VISIT BY PRIME MINISTER)

Mr. Henig: asked the Prime Minister if he will make an official visit to Paris in the near future.

Mr. Eldon Griffiths: asked the Prime Minister what plans he has to pay an official visit to Paris.

Mr. Edward M. Taylor: asked the Prime Minister if he will arrange an early meeting with the President of France to discuss matters of mutual interest and if he will make a statement.

Mr. Winnick: asked the Prime Minister if he will make an official visit to Paris in the near future.

The Prime Minister: I have no immediate plans to do so, Sir.

Mr. Henig: Would my right hon. Friend place high on his agenda, some time during July when the new French President will have been elected, a meeting with his opposite number? Will he start afresh? [Interruption.] Does he not think that this is a good moment to reaffirm the fact that the—[Interruption.]

Mr. Speaker: Order. Last week the Opposition complained of noise during Question Time from the Government. We must be fair to each other and listen to each other.

Mr. Henig: Does my right hon. Friend not think that this would be a good moment to reaffirm that, in the view of Her Majesty's Government, Britain's political and economic future lies in our rapid entry into the European Economic Community?

The Prime Minister: Obviously the question of further discussions with the French Government must await the result of the French elections, as my hon. Friend has said. With regard to the second


part of the question, I dealt with that at some length in a speech at the Council of Europe celebrations yesterday, which I think was heard by a number of hon. Members. A copy of what I said is being placed in the Library.

Mr. Eldon Griffiths: While doubting that the change, even of the French President, can dissolve overnight such difficulties as the common agricultural policy and the position of the Commission, would the Prime Minister not agree that the wind may be set fairer for negotiations? Would he therefore say that it remains his policy, as soon as possible, to open up negotiations under Article 237, and in the meantime will he avoid any of those dramatic personal forays which will simply make it more difficult for my hon. and right hon. Friends to lead this country into Europe after the next election?

The Prime Minister: I agree with the first three-quarters of the hon. Gentleman's supplementary question. He is right to show a certain degree of caution in this matter at this time. After all, there is no reason to suppose—the election is not a matter for us but for the French people—at this time that there is any withdrawal of the embargo or veto which has been so frustrating to so many of us for so long. We must await the situation following the election.
The hon. Gentleman is also right to stress the fact that as and when negotiations do begin there are still enormous difficulties. He is right in saying, as I indicated last week, that the agricultural policy problem has become more difficult within the Six than it was when the House took its decision in May, 1967. He is right to be cautious about this. He is equally right to suggest, as I did yesterday, that we must make clear that our application remains on the table and that, if there is a fairer wind, we shall take advantage of it.

Mr. Edward M. Taylor: When in Paris would the Prime Minister take the opportunity of inquiring about the excellent procedure they seem to have there whereby, under the previous President, they took regular opportunities of seeing whether the Government still enjoyed the confidence of the people?

The Prime Minister: I thought that the basis of the French Constitution was

that the Government was elected for a period of seven years at a time. In this country we have a practice that a Government might go the whole of the five years. It has happened only once and that was under right hon. Gentlemen opposite, in 1964.

Mr. Winnick: Is my right hon. Friend aware that a number of people who are not opposed in principle to joining the Common Market do not wish to see this country humiliated a third time through being refused membership, upon any conditions whatsoever?

The Prime Minister: What I said about caution, and what was indicated in the Questions of the hon. Member for Bury St. Edmunds (Mr. Eldon Griffiths) and my hon. Friend, suggests that we must take this matter fairly slowly, fairly coolly, until we see what the situation there is. I think that all of us would agree that nothing that has happened in the last month calls for any reversal of Her Majesty's Government's policy. Indeed, what we have done during the very dark days of the veto has been abundantly justified by events, over which we have no control, of the last fortnight.

Mr. E. L. Mallalieu: Before making an official visit to France, would it not be the path of discretion to await an official invitation?

The Prime Minister: I always do.

Oral Answers to Questions — WOMEN CHARTERED ENGINEERS

Mr. Lubbock: asked the Prime Minister how many women chartered engineers are employed by Government Departments and if he will seek the advice of the Central Advisory Council for Science and Technology on ways of increasing the number of women studying for engineering qualifications.

The Prime Minister: Of the small number of women chartered engineers, two are known to be employed in Government Departments and a further two are expected to qualify shortly. All the Departments concerned as well as the Central Advisory Council for Science and Technology are aware of the need to increase the number of women studying for engineering qualifications.

Mr. Lubbock: Are not these figures which the Prime Minister has quoted


very depressing, particularly since this is "Women in Engineering Year"? Will the Prime Minister ask his right hon. Friends the Secretary of State for Education and Science and the Minister of Technology to convene a conference to discuss the position of women in engineering and how the numbers might be increased? Will he see that invitations are sent to prominent women engineers in the United States and the Soviet Union, where the number of women qualified in engineering is very much higher than here?

The Prime Minister: I am obliged to the hon. Gentleman for bringing this point to my attention. I know that he is concerned in general with the question of training, and the number of women engineers who achieve chartered status, rather than with the narrower point of the Civil Service. I have asked the Head of the Civil Service to look into the position, in consultation with the Departments concerned, to see what we can do to increase the number of women chartered engineers in the Civil Service.
On a wider point, I am asking the Council to which the hon. Gentleman referred to look further into this matter. I cannot express an opinion on whether a conference of the kind he suggests would be helpful, but I will certainly consider it.

Mrs. Lena Jeger: Will my right hon. Friend bear in mind that the problem is caused partly by the syllabus of teaching at so many girls' schools having no relevance to engineering, and will he consult his right hon. Friend on the possibility of exchange courses at boys' and girls' schools to encourage the interests of girls in engineering?

The Prime Minister: Without going into all the issues raised by my hon. Friend, this will be looked into as a result of the Central Advisory Council taking this matter on to its agenda, and my right hon. Friend will be involved in that examination.

Dame Irene Ward: Will the right hon. Gentleman consider whether career advisers who go to schools where there are both girls and boys could explain to the pupils that there are openings in engineering for trained women and men? This would put the possibilities of an engineering career into proper focus. Not

enough is done to inform both sexes about the prospects of a career in engineering.

The Prime Minister: I will bring that proposal to the notice of my right hon. Friend. If more of those who went round to schools giving valuable advice on careers were able to give the sort of advice which the hon. Lady suggests, there would be more willingness in the schools concerned to provide suitable courses.

FINANCE BILL (COPIES)

Mr. Speaker: We come now to the point of order which the hon. Gentleman the Member for Worcestershire, South (Sir G. Nabarro) kindly deferred until Questions were over.

Sir G. Nabarro: On a point of order. Mr. Speaker, I reported to your office at 2.15 p.m. today that no copies of the Finance Bill were available in the Vote Office. As this represents a grave embarrassment to many back-bench hon. Members who cannot possibly memorise scores of pages of abstruse proposed legislation, and as an assurance was given on 29th April, in answer to a Written Question, that copies would be available in good time, I am making an appeal to you to try to make some emergency arrangements before the later stages of the Bill.
It is said, Sir, that the shortage of copies of the Finance Bill is due to an industrial dispute at Her Majesty's Stationery Office, but I remind you that immediately the Second Reading of the Bill is achieved today many hundreds of Amendments will be placed on the Notice Paper none of which back-benchers will be able to assess without ready reference to copies of the Bill which are not available. To facilitate my endeavouring to catch your eye during the debate today, I have borrowed the Librarian's copy of the Bill as being the only copy available.
Could you, Sir, take steps to cause emergency arrangements to be made forthwith for the printing of Amendments to the Finance Bill, if necessary on roneod sheets, or otherwise, but in a form which will assure that hon. Members have the Amendments during the next two days and certainly before the weekend, as we are told that there are to be two days


in Committee of the Finance Bill on the Floor of the House next week and two days the following week.

Mr. Speaker: May I deal purely with the point of order? Before I do so, may I say that I was informed by the Deliverer of the Vote on 30th April that, owing to an industrial dispute, there might be a shortage of essential papers to the House.
Yesterday, I received a second letter in which the Deliverer of the Vote told me that the Vote Office yesterday had only 30 copies of the Bill left but that every hon. Member who has papers sent to him in the normal way has already received a copy of the Bill, and that in all 970 copies of the Bill have been distributed by the Vote Office.
In the Written Answer to which the hon. Gentleman refers, the Minister said that when the initial stocks had been sold supplies might be restricted due to an industrial dispute in Her Majesty's Stationery Office's distribution warehouse.
These are events beyond our control, but the House would wish me to take the opportunity of saying that the fault does not lie with the Deliverer of the Vote, to whose devoted work the House is indebted day by day.

Mr. Thorpe: Further to that point of order. While I accept the information that 970 copies have been distributed, the fact remains that many right hon. and hon. Members who have asked for copies of the Finance Bill, so that they may know what the House is debating this afternoon, have not been able to obtain copies. We are dealing with a Bill of 53 Clauses, 21 Schedules and 192 pages, and certain hon. Members have been unable to obtain copies.
No blame attaches to any official of the House, but those hon. Members who have been unable to obtain copies—I was unable to obtain a copy from the Vote Office, but have been able to do so from another source—are gravely embarrassed and respectfully seek your guidance and protection on this matter.

Mr. Speaker: I hope that nothing I said led the right hon. Gentleman to think that we were not in a difficulty. I pointed out that there were only 30 copies of the Bill left in the Vote Office

by yesterday, but the House is not immune from the effect of industrial action. The only question for us now is that we should make the best of a difficult position.

Mr. Heath: With great respect, Mr. Speaker, while we appreciate the difficulties about having printed copies of the Bill, it is possible in a variety of ways to have an alternative presentation of the Bill by photostat or roneod copies. We are asking that steps should be taken during these difficulties to ensure that copies of essential papers are made available.
We ask for your guidance on whether it is the responsibility of the Leader of the House, the Services Committee, or officials of the House to ensure that this is done.

The Lord President of the Council and Leader of the House of Commons (Mr. Fred Peart): It is right that I should intervene. As you rightly said, Mr. Speaker, the dispute has created the inconvenience which has been mentioned. More than 1,000 copies of the Bill have been issued and every hon. Member who asked for papers to be sent to him has received a copy.
I have just been in touch with the Vote Office. I admit that there are 600 copies outstanding, but this is not the fault of the Vote Office or of the House. The hon. Member for Worcestershire, South (Sir G. Nabarro) is right in saying that there may be difficulties about Amendments on Committee. I will do all that I can, in conjunction with Mr. Speaker and the Services Committee, to try to make sure that information is available.

Several Hon. Members: rose—

Mr. Speaker: We cannot pursue this much further.

Mr. Robert Cooke: Further to the point of order. I gave you notice, Mr. Speaker, that I wanted to raise with you a passage on page 277 of Erskine May, Chapter XIII, "Machinery of Parliament", line 13 of which reads as follows:
All parliamentary papers are available to Members on application to the Vote Office …
This is not so, and the Sale Office, the alternative source of supply in this building, has had no copies of the Finance Bill available since the day of publication.
We know that the Deliverer of the Vote has done his best to obtain copies of the Finance Bill from the Stationery Office warehouse, and that copies are there now awaiting collection, but the warehouse has refused to release copies to the Deliverer of the Vote because of a political dispute with the Government. No copies are available to hon. Members on demand and no copies are lying on the Table, as is customary when a Bill is to be debated.
The Government knew about this a week ago and have taken no steps to provide hon. Members with copies; yet they insist on putting the Finance Bill down today for Second Reading. I ask for your protection, Mr. Speaker, because we should not be asked to give a Second Reading to an invisible Bill.

Mr. Speaker: Order. The notice which the hon. Gentleman said that he would give me had not reached the Chair until I heard him speak. But all that he has done is to underline the seriousness of the issue. All that I have to decide is whether we go on with the Second Reading of the Bill today, and we shall he doing that.
The Leader of the Opposition was right to call attention to the difficulties we shall be faced with about Amendment Papers. We shall do what we can to meet the wish of the House. It would have been impossible to roneo today this enormous Finance Bill.

Mr. Thorpe: Further to that point of order. With great respect, Mr. Speaker, may we ask your guidance on what is a very important Parliamentary matter? No blame attaches to any official of the House, to those who are responsible for printing, or those who are responsible for the management of Government business. That is accepted. But we are in the difficulty that the House is asked this afternoon to give a Second Reading to a Bill which many hon. and right hon. Gentlemen, of whom I am one, who have applied at the Vote Office for a copy of the Bill, have been told that it is not available.
Is it right that in those circumstances we should be asked to approve a Bill the details of which are not generally available to the House, and when, therefore, we are being asked to vote in the dark?

Hon. Members: Hear, hear.

Mr. Speaker: Order. I must remind the right hon. Gentleman of my original statement. Nine-hundred and seventy copies were made available to Members who are on the usual posting list. The situation is difficult, but I see no reason for not taking the Second Reading.

Several Hon. Members: rose—

Mr. Speaker: Order. I can take only one point of order at once. I hope that we can get on.

Mr. Woodburn: Can what is going on just now be described as a sympathetic strike?

Mr. Bessell: On a point of order. On a Finance Bill, with all its implications, and in view of the special importance the House attaches to financial matters, is there any precedent in the history of the House for discussing and voting upon a Bill which is not laid upon the Table, and to which many hon. Members do not have access?

Mr. Speaker: Order. I understand there is a precedent for discussing a Bill of which Members have not had a copy. I imagine that there is no precedent for discussing a Finance Bill of which all Members have not had a copy, but there is also no precedent for the circumstances which have led us to be short of copies of the Finance Bill today.

Several Hon. Members: rose—

Mr. Speaker: Order. We have quite a lot of business before us. Points of order will remove from somebody the opportunity of debating.

Mr. Heath: Further to the point of order. You have already recognised, Mr. Speaker, that this is a very serious matter. I understand that those right hon. and lion. Members who asked for all Bills to be sent with their Order Papers have received a copy of the Finance Bill, but that those who rely on collecting from the Vote Office Bills which interest them have in many cases not been able to obtain a copy of the Finance Bill.
If that is a correct statement of the position, does it not make it very difficut to proceed with a debate in which right hon. and hon. Members who have followed their normal procedure have not been able to get copies of the Bill?
I would ask you to rule, Mr. Speaker, whether or not in those circumstances we can proceed with the debate on the Bill, and would also ask what the justification for so doing is.

Mr. Speaker: Order. I hope that nothing that Mr. Speaker has said has minimised the gravity of the situation. The position is exactly as the right hon. Gentleman has said, that some hon. Members will find it difficult today to debate the Second Reading of the Bill because they followed their usual practice, and by following it did not obtain a copy of the Bill.
The right hon. Gentleman asked me to rule, and I rule that there is no reason why we should not proceed with the Second Reading.

Mr. William Hamilton: To assess the merits of this discussion, Mr. Speaker. could you tell the House how many Members received a copy of the Finance Bill? Presumably the Deliverer of the Vote would know the figures of Members who have the papers delivered. I do, and I suspect that a large majority of hon. Members do.

Mr. Speaker: I am advised that 600 copies were sent. [HON. MEMBERS: "Oh."] Order. Noise does not help us to discuss what is a very serious issue.

Mr. Galbraith: Further to the point of order. If copies of the Finance Bill have been published and are being withheld at the Stationery Office, as my hon. Friend the Member for Bristol, West (Mr. Robert Cooke) said, is not it a breach of the privilege of the House when the copies actually exist and cannot be produced?

Mr. Speaker: Order. If the hon. Gentleman wants to put that point he must not make it in the form of a question, but must submit it to me in the ordinary way, and I will rule on it in due course.

Sir F. Bennett: Further to the point of order. May I seek clarification from you, Mr. Speaker. Are you really saying to the House that we shall have to proceed to the Second Reading of a Bill and listen to a Minister referring to Clause after Clause of a Bill which a number of us do not have before us, and that tonight we shall be expected to vote on a Bill

that a number of us will not even have seen by then? Is this really the effect of your Ruling and the instruction you are giving to the House?

Mr. Speaker: Order. The hon. Gentleman is merely suggesting that the Ruling is unjust.

Mr. Jopling: The present instance is a special case, because we are debating the Finance Bill. You told us, Mr. Speaker, that 600 hon. Members obtained copies of Bills in the normal way. But many hon. Members pass copies of the Finance Bill when they arrive to professional people outside the House—[HON. MEMBERS: "Oh."] Why not?

Mr. Speaker: Order. The hon. Gentleman is advancing a perfectly serious argument.

Mr. Jopling: Many of us rely on advice from people outside the House. Many of us rely on the advice of our constituents, and many other hon. Members rely, for instance, on advice from trade union organisations—[Interruption.]

Mr. Speaker: Order. It does the House no good if one half of the House treats what is a very serious matter lightly.

Mr. Jopling: Of the 600 Members who received the Bill in the normal way, many will have parted with their copies in the expectation that they could obtain another from the Vote Office.

Mr. Speaker: Order. The hon. Gentleman can assume that Mr. Speaker, as an old Parliamentarian, is aware of that.

Several Hon. Members: rose—

Mr. Speaker: Order. I hope that we can get on.

Mr. Howie: Further to the point of order. Could you tell us, Mr. Speaker, how many hon. Members have already put their names down to speak in today's debate? How many do you think have been prevented from preparing their speeches because of this misfortune?

Mr. Speaker: The last thing that one should ask Mr. Speaker to do is to think.

Sir Knox Cunningham: While appreciating your difficult situation, Mr. Speaker, in this matter—

Mr. Rose: One man, one Order Paper.

Sir Knox Cunningham: —and the Ruling which you have given, does it not make a mockery of Parliamentary democracy to debate a Bill which many Members have not seen? Would you accept from the Leader of the House a Motion to adjourn the debate until the Bill is put before hon. Members?

Mr. Speaker: Order. The hon. Gentleman has added nothing new to what is a grave problem. I hope that we can now get on.

Mr. Thorpe: On a point of order. I beg to ask leave to move the Adjournment of the House under Standing Order No. 9 for the purpose of discussing a specific and important matter that should have urgent consideration, namely,
that the House of Commons is being asked to vote for the Second Reading of a Bill the contents of which are not generally available to all Members of the House.
The fact that it is urgent is proved beyond peradventure—

Mr. Speaker: Order. The application under Standing Order No. 9 will take place after the statement by the Minister of Technology.

Mr. Kirk: On a point of order. Even if it is right to deal with the Second Reading of the Bill, on which I have some reservations, there is a Motion in the name of the Chancellor of the Exchequer to follow the Second Reading, a Motion which is absolutely incomprehensible unless copies of the Bill are available to hon. Members. May we have an assurance that that Motion, at any rate, cannot be moved?

Mr. Speaker: Order. We will deal with that when we get to it.

Mr. John Page: Further to that point of order. May we be informed whether the industrial dispute is official or unofficial?

Mr. Speaker: Order. Mr. Speaker is not prepared to comment on industrial disputes at all.

Mr. English: May we have an end to this, Mr. Speaker? One would think that the House had not passed Bills long before the days of printing, including Finance Bills.

Mr. Iain Macleod: Mr. Speaker, you have given a Ruling about today's business. I wonder whether, on a point of order, I might ask you to consider a matter which arises on the question of Amendments to which one or two hon. Members have referred.
As you know, Amendments to the Finance Bill are printed in the order in which they are received. It is, therefore, of some importance to hon. Members, particularly perhaps in view of the suggestion that this year the Bill should effectively be split, that they should be able, as soon as Second Reading is complete, to hand in to the Table the Amendments which can be accepted. Clearly, it conveys an advantage to those who have copies of the Bill, because their Amendments can then be in the proper form.
I am asking whether, in conjunction with the Leader of the House, arrangements can be made for some copies to be available, perhaps in the Table Office, so that hon. Members who, in the course of the day, plan to put in such Amendments immediately after Second Reading, will not be thwarted in their intentions?

Mr. Speaker: The right hon. Gentleman has a very practical suggestion which, obviously, my Department will following up at once.

UPPER CLYDE SHIPBUILDERS

3.55 p.m.

The Minister of Technology (Mr. Anthony Wedgwood Benn): With permission, Mr. Speaker, I should like to make a statement on Upper Clyde Shipbuilders.
The Government have now had an opportunity to consider the request made by Upper Clyde Shipbuilders to the S.I.B. for further support and the recommendation of the S.I.B. on this request.
When the Government accepted the Geddes Committee recommendations for the reorganisation of the shipbuilding industry, and Parliament passed the Shipbuilding Industry Act, it was always intended that the objective was to create viable shipbuilding groups able to compete profitably for orders at home and abroad. The Upper Clyde Shipbuilders were established with the same objective.
We have always recognised that the inherited difficulties due to bad management, poor industrial relations, absenteeism, low productivity and inadequate capital investment in the past would pose serious problems in establishing U.C.S. on a viable basis. However, we have never accepted and do not now accept that there is a "safety net" under Upper Clyde Shipbuilders or any other shipbuilding group which entitles those working in these groups to expect that the Government will continue to underwrite losses irrespective of the circumstances.
The Government are, therefore, prepared to make a measure of further help available on condition that such help achieves the objectives which I have described.
I am, therefore, going to Glasgow tomorrow to discuss the situation with the management, the unions and those others most concerned.
In the last few days there has been a spate of publicly expressed demand for Government money. This will be an extremely difficult operation upon which the livelihood of so many thousands of people, and the reputation of the shipbuilding industry in Scotland and the community interests of the Clyde depends, and I hope that it can be conducted in reasonable privacy.
After completing these talks I shall be in a better position to inform the House on the situation as it develops.

Mr. Gordon Campbell: The House will be glad that the Minister has been able to make his promised statement so early and to know that he is making an urgent visit to Glasgow tomorrow. Will he agree that a special, concerted effort is needed by all concerned, including all those who work in this industry on the Upper Clyde? Will he also keep the House informed of developments?

Mr. Benn: Yes, I accept what the hon. Gentleman has said. The solution of this problem lies with the Clyde, though the Government may be able to play some part in it. I will, of course, keep the House informed, but I would rather go there myself and have these talks before making a fuller and further statement.

Mr. Small: Does my right hon. Friend recognise that I have come straight from the Clyde having been there all day yesterday, and am grateful for the statement that he will be making a personal visit there? There is tremendous dismay in the yards in the matter of the Upper Clyde Shipbuilding, which has international significance in that contractors abroad also are expressing doubts about the future. I hope that the Minister has a successful day on the Clyde and goes slightly beyond the matter of bridging finance.

Mr. Benn: I am well aware of what my hon. Friend has said. He accompanied me on my last visit. This will be my third visit in three months, and it is an indication of the seriousness with which we ourselves take the position.

Mr. Edward M. Taylor: Will the Minister assure us that, when the discussions are completed and when the objectives on which aid is dependent are laid down, every person in the yard will know clearly what are the objectives and targets which have to be met? Will the Minister also say whether, as well as meeting representatives of the workpeople, he will bring into the discussion the 40,000 men who, through sub-contracts, depend indirectly on shipbuilding for their livelihood?

Mr. Benn: On my last visit I went to each yard and addressed meetings of the workers with the object of explaining to everybody that they have a part to play in the salvation of the Upper Clyde Shipbuilders.
I referred in my statement to other interested parties and I had in mind the component manufacturers and others.

Mr. Rankin: Is my right hon. Friend aware that I accept warmly every part of the statement which he has just made? Does he realise that in Clydeside we do not want safety nets? We have the men, we have the jobs, but our need is that of money. The shipbuilding body which has been set up is less than a year old. It needs help, and I hope that my right hon. Friend will see that help is forthcoming in sufficient quantity to enable it to do the job.

Mr. Benn: The Government recognised, and so did the House when it voted the money for the Shipbuilding


Industry Board, that some public support was necessary to reorganise the industry into viable groups. But the solution of the problem does not lie merely or even principally in the readiness of my colleagues and I—and the Chancellor of the Exchequer—to release money. It is a problem which has psychological and other overtones that have to be taken into account, and I am anxious to discuss them with the people on the spot who face this very difficult position.

Miss Harvie Anderson: While recognising that it would be unwise to go into this matter much further today, would the Minister accept that, inevitably, there is anxiety about his use of the words "a measure of support"? The important thing for Clydeside is that the measure should produce a viable unit and, by so doing, restore confidence not only in Clyde shipbuilding but in shipbuilding throughout the United Kingdom.

Mr. Benn: I am grateful to the hon. Lady. Confidence in shipbuilding throughout the United Kingdom is high, and our order book now is very nearly the highest on record, if not the highest. A great deal is attributable to the reorganisation carried through by the Government.
I am aware of the anxiety, and it is for that reason that I am to go again to the Upper Clyde myself. But the ultimate success of the operation, including the maintenance of employment, depends upon the Upper Clyde being able to discharge orders profitably and not to be dependent upon Government support.

Mr. Albu: Would my right hon. Friend not agree that this situation, which has been going on for a long time, might have been very much better if, when the previous Conservative Administration promised to place the "Queen Elizabeth" with John Brown, they had insisted on an improvement in the management of that yard?

Mr. Benn: There is much past history. But I do not believe that, when we have a difficult job to do, it would serve much of a purpose to go back over past history, about which inevitably there would be a variety of explanations.

Mr. Wingfield Digby: While recognising the special problems of the Upper Clyde, will the right hon. Gentleman do

nothing to prejudice S.I.B. help to other British shipbuilders and, in particular, put no pressure on the viable yards of the Lower Clyde to join the less viable yards of the Upper Clyde?

Mr. Benn: No one knows better than the hon. Gentleman the rôle of the S.I.B. in this matter. It is led by a distinguished industrialist, with trade unionists and other industrialists on the Board. My position is that I am called upon statutorily to approve its recommendations. All the considerations raised in the hon. Gentleman's question are very much in the minds of the Board and myself.

Several Hon. Members: rose—

Mr. Speaker: Order. A point of order. Mr. Thorpe.

FINANCE BILL (COPIES)

Mr. Thorpe: Mr. Speaker, I beg to ask leave to move the Adjournment of the House, under Standing Order No. 9, for the purpose of discussing a specific and important matter that should have urgent consideration, namely,
that the House of Commons is being invited to vote for the Second Reading of a Bill the contents of which are not generally available to all Members of the House.
The fact that this is an urgent matter need not occupy the House for more than a few moments. We know that the subject-matter which I seek to raise is down for debate in public business at the conclusion of this point of order and the Ministerial statement which preceded it. In my submission, there is no doubt that the matter is urgent.
The fact that it is definite has again been generally agreed, namely, that the subject-matter of the debate is not available in legislative form. In my submission, it is of no significance how many copies of the Bill were printed and distributed. The fact remains that hon. Members going to the Vote Office before the debate—and I was one of them—were not able to obtain copies. Therefore, whatever the views of any hon. Member, I hope that it will be generally agreed that the matter is definite and urgent.
The third and final limb on which I would have to succeed in asking you to rule in my favour is whether it is a matter of importance. I submit that a


Finance Bill which seeks to raise large sums of money from the taxpayer is a matter of great importance.
Having been fortunate in obtaining a copy, not through the Vote Office, but by borrowing a file copy, perhaps I may read the Long Title of the Bill. It is:
A Bill to grant certain duties, to alter other duties, and to amend the law relating to the National Debt and the Public Revenue, and to make further provision in connection with Finance.
It is historically accepted that one of the major reasons why the House of Commons found itself in conflict with King Charles I—

Mr. Speaker: Order. The right hon. Gentleman must not debate on his application for the S.O.9. He must not make the speech that he would make if he were granted the S.O.9.

Mr. Thorpe: With respect, I have no intention of doing so, Sir; I only seek to urge upon you that, on the basis of past precedents, the matter of public finance and the right of this House with full knowledge to vote these matters is of great constitutional significance.
One of the main reasons why King Charles I was involved in a great controversy with this House and lost his head was that he sought to raise money without reference to this House and by the exercise of the Prerogative. It was for that reason that the whole question of ship money caused Hampden and many other distinguished Parliamentarians to oppose it—

Mr. Speaker: With respect, I cannot question anything that the right hon. Gentleman has said. But he must submit his application for an S.O.9. The points that he is making would be quite in order in his speech if he got an S.O.9.

Mr. Thorpe: Mr. Speaker, I respectfully submit that, on the basis of past precedents, the House has attached very great importance to having the full rights of raising moneys for the public purse and for the public services and taking the opportunities of adequate debate. I will leave the historical precedents by saying that, so great was the importance, that Parliamentarians, in my view rightly, were prepared to engage in a civil war.
I move, then, to the present position. The Opposition are allowed to select certain matters for debate in the House on Supply days. Those matters are within their discretion on the basis that the House is not prepared to grant moneys without the remedy of grievances. That is why there is a green bag behind your Chair in which petitions may be lodged—

Mr. Speaker: Order. We cannot at this stage have the whole of the constitutional struggles of the House of Commons. versus the Monarch and the apparatus of the House. The right hon. Gentleman is applying for an S.O.9. He must keep to his application.

Mr. Thorpe: I am grateful for your guidance, Mr. Speaker. I can relieve you and the House, for I have now left historical precedents and I come to the present day.
Mr. Speaker, I respectfully adopt what you have said about it being without precedent for the House of Commons to be asked to give a Second Reading to a Finance Bill the contents of which are not generally available to hon. Members of the House of Commons. To use your own words, "It is not on the Table." It is only through the withholding of our vote for moneys that historically we have the right to seek the remedy of grievances of our constituents. This is the whole historical basis of this place.
Bearing in mind all the past precedents and the contemporaneous importance which we attach to the raising of moneys and taxation, we are being asked for the first time in the history of the House to give a Second Reading to a Finance Bill the contents of which are not generally available to hon. Members before the debate.
I repeat that no blame attaches to any of the officials of the House, and certainly no blame attaches to the Treasury Ministers who are responsible for this debate. I acquit them—

Mr. Speaker: Order. The right hon. Member is again drifting into the merits of the matter which he will be able to debate if he is granted an S.O.9.

Mr. Thorpe: I ask you, Mr. Speaker, to say that since it is certainly my view, which I respectfully adopt and endorse from you, that never before has the House been asked to give a Second Reading to


a Finance Bill without the Bill being generally available, and bearing in mind the historical importance which this House attaches to the vote of moneys, we should have the right to adjourn the House under Standing Order No. 9 to debate these matters, and that, although it is not within my rights procedurally to suggest it, the whole of the debate should be adjourned until the Bill is available to all Members.

Mr. Speaker: The right hon. Member for Devon, North (Mr. Thorpe) asks leave to move the Adjournment of the House for the purpose of discussing a specific and important matter that he thinks should have urgent consideration, namely,
that the House of Commons is being invited to vote for the Second Reading of a Bill the contents of which are not generally available to all Members of the House.
As the House knows, under revised Standing Order No. 9 Mr. Speaker is directed to take into account the several factors set out in the Order, but to give no reason for his decision.
I have given careful consideration to the representations made by the right hon. Member in his speech and to all that went before, but I have to rule that his submission does not fall within the provisions of the revised Standing Order. Therefore, I cannot submit his application to the House.

Several Hon. Members: rose—

Mr. Galbraith: On a point of order.

Mr. Speaker: Order. I am not prepared to take points of order on my Ruling.

QUESTION OF PRIVILEGE

Mr. Galbraith: This is a further point of order. I am asking, Mr. Speaker, whether this is the right moment—

Mr. Speaker: I apologise to the hon. Member. I had forgotten ant he wanted to raise another matter.

Mr. Galbraith: I merely wanted to ask you whether the situation in which we find ourselves today may not be a breach of privilege. I understand that copies of

the Finance Bill have been printed and are in existence, but that somebody is preventing Officers of the House from collecting them. If these facts are true, as I believe them to be, it would seem that this constitutes a breach of privilege. I should, therefore, like your guidance on the matter.

Mr. Speaker: Order. The hon. Member is submitting to the Chair that interference by some persons with the delivery of copies of the Finance Bill, thereby preventing all hon. Members of the House from obtaining copies, is a breach of privilege. I shall rule on that matter tomorrow, after my customary 24-hours' consideration.

QUOTATIONS FROM SPEECHES

Mr. Speaker: I should like to mention two minor points of order, one of which may seem rather small but which is important.
I wish to correct an inaccurate Ruling that I made yesterday in answer to the right hon. Member for Wolverhampton, South-West (Mr. Powell), which is recorded in HANSARD at column 50, and to rule that it is in order to quote from something previously said in the House when raising a point of order, as distinct from a supplementary question, if, of course, it is a point of order and not a point of argument.
I am grateful to the right hon. Member for Wolverhampton, South-West for calling attention to the error that I made yesterday.

Later—

Mr. Orme: On a point of order. Concerning the reference that you, Mr. Speaker, made previously to the right hon. Member for Wolverhampton, South-West (Mr. Powell), when he raised a point of order arising out of a point of order that I had raised about quoting what a Minister had previously said, may I ask whether it is possible, in retrospect, to get that quotation on the Order Paper?

Mr. Speaker: Order. I will not pursue that point at the moment, because I also said that my Ruling applied to real points of order and not to supplementary questions disguised as points of order.

TRANSFER OF QUESTIONS

Mr. Speaker: I promised to look into the matter raised by the hon. Member for Penistone (Mr. John Mendelson) who complained that one of his Questions had been transferred and in the process had been changed from being an Oral Question to being a Written Question.
The facts are that the hon. Member handed in his Question addressed to the Foreign Secretary on 28th April. It was transferred to the Ministry of Technology the following day. Notice was published in the normal way on the morning of Wednesday, 30th April. The Question remained dated for 5th May, since it is the well-known practice of the Table Office never to change the date of a Question, except at the hon. Member's request.
If the hon. Member, on 30th April, had chosen to defer his Question to the day three weeks ahead, 21st May, on which the Minister of Technology is at the top of the list, he would have secured a high place among the Questions for Oral Answer.
As the House knows, a Question which has been fully answered cannot be replaced on the Order Paper since each Minister answers for the Government as a whole. It will, therefore, not be possible, in the light of the Written Answer given yesterday, for an identical Question to be resubmitted to the Foreign Secretary.

Mr. John Mendelson: May I briefly submit that the main burden of my complaint does not deal with the portion with which you, Mr. Speaker, have just dealt? The main burden of my complaint is that it was wholly out of order for the Foreign Secretary to transfer this Question to the Ministry of Technology, because the Question that I submitted dealt with the authorisation of the export of military transport aircraft for use in South Vietnam.
I could not develop this point yesterday because I had not received the Written Answer. I have now received the Written Answer from my hon. Friend the Member for Huddersfield, East (Mr. J. P. W. Mallalieu) and it reads:
Any proposal by the firm to export military transport aircraft would be considered by Her Majesty's Government in the light of stated policy and of the circumstances at that time. I cannot comment on recent Press speculation."—OFFICIAL REPORT. 5th May, 1969; Vol. 783. c. 29.]
The point that I make—and I believe that it is a serious point of principle—is that it is only the Foreign Secretary who can give authority for the export of military transport aircraft. It can never be given by the Minister of Technology. Therefore, in the light of this reply, it was wholly out of order for the Foreign Secretary to transfer this Question to the Ministry of Technology.
If back benchers are to have no remedy against such procedure, which I submit is wholly out of order, by not being allowed to resubmit the Question to the Foreign Secretary, in future any Minister could transfer a Question to another Department and there would be no remedy. Therefore, I urge upon you, Mr. Speaker, that, quite beyond the importance of the Question, I ought to be allowed to resubmit it to the Foreign Secretary to safeguard the interests of other hon. Members in future.

Mr. Speaker: Order. Yesterday, I ruled quite specifically on the point that the hon. Member has now raised. The matter of transfer from one Minister to another is not a matter for Mr. Speaker or the Table. Hon. Members from time to time find themselves in difficulties because a Question has been so transferred.
If I may try to assist the hon. Member, what he should have done, some time ago now, when he found that his Question had been transferred, was to take the matter up with the Minister concerned.

DATA SURVEILLANCE

Mr. Kenneth Baker: I beg to move.
That leave be given to bring in a Bill to prevent the invasion of privacy through the misuse of computer information.
One of the features of our society is the growing use of computers. There is no doubt that they will revolutionise our society and improve the conditions of man. But they should be our tools, not our masters. Computers should operate within the framework of our society within its customs, rights and laws and not seek to distort and dominate that framework.
I should like to make clear at the outset that this is not a Luddite Measure which seeks to inhibit and prevent the use of computers. On the contrary, this is a forward-looking Measure. I am not leading a campaign to restore the quill pen. My Bill seeks to establish a code of conduct, backed by legal sanctions, for computer operators operating these personal data banks. At the moment these computer operators do not have a code such as doctors and lawyers have, and are often placed in a difficult position in regard to knowing what information is confidential and what information should be passed on, and to whom.
To give a precise example of a dilemma, two months ago the clerk of a rural district council in East Anglia wrote to me saying he had been asked by the clerk of a neighbouring city council to pass information about one of his former council tenants, concerning that tenant's ability to pay rent, his marital status and marital stability and whether he was naturalised. The clerk of the rural district council said it was not his business to pass such information around.
The difficulty that arises from a computer is that when housing records are computerised in this way no specific decision has to be made as to whom information can be passed. This is the essential dilemma of the problem. One has to balance the advantages of administrative efficiency against the rights of individuals.
Bureaucracy, I suspect, is tolerated because it is relatively inefficient, but when it has the opportunity to become highly efficient we have to examine again

the checks and balances that may be required to operate on these personal data banks. There are many of them around the country. I understand that of the 120 or so Government computers about one-half are concerned with recording personal information. They are the well-known ones—the P.A.Y.E. computer at Kilbride, the Social Security computer at Newcastle, the Giro, Premium Bonds and Savings Bank computers; and now there is the vehicle licensing computer at Swansea.
There are also computers being operated by local councils for housing and welfare records. Information at all these sources is available virtually at the pressure of a finger to an official in Whitehall or in a town hall. Behind those officials could stand the politicians. This is a real danger, because all this apparatus of a computer-based autocracy is coming into existence. I do not want to sound alarmist, but George Orwell's nightmare of 1984 could easily come about by misuse of computers.
My Bill would also cover such things as medical records. One of the developments in the future will be individual medical records; and each of us will be computerised. This has the enormous advantage that when any person falls ill away from home the doctor who is to attend him will be able to dial in and get his medical record. This means that the treatment may be much better but it has the obvious danger that, for example, drug companies, insurance companies, or a man's employer may be able to get that kind of information. This is something on which there is at present no protection at all. My Bill would also cover the private sector and, in particular, credit rafting bureaux.
Specifically, what the Bill would do is, first, provide that a computer holding information specifically about people would have to be registered, together with the purpose for which the information is required. We have suggested that the register should be kept by the Registrar of Restrictive Practices, but this is not essential. It should, however, be kept by a registrar so that there is a judicial framework.
Secondly, when the name of any person appears on any computer that person will receive a print-out, like a bank statement, containing details of the personal information that the computer holds,


which departments have access to it and what use has been made of information where it has been passed since the last print-out. After the first free print-out, anyone can apply for a subsequent printout for the payment of a fee.
Thirdly, each person will have the right to challenge the accuracy of the information on the statement and the relevance of the purposes for which it is being kept, and the right to claim that the information is out of date through the passage of time and should be expunged.
Fourthly, there will be penalties for owners or operators of data banks who send information to non-qualified recipients. If inaccurate information is sent out and an individual suffers loss as a result there will be a cause for damages.
Finally, there will also be penalties for anyone who attempts to get information for malicious purposes; otherwise, the Bill would be a blackmailer's charter. It is not proposed to extend the provisions of the Bill to the police or counterespionage records.
In conclusion, the principle of the Bill has been accepted by the Government. Clause 65 of the Post Office Bill, which is going through the House at present, lays down that there will be penalties upon Post Office operatives who work computers who misuse the information they come across in the course of their work. The penalties are very heavy—imprisonment and heavy fines. But what is lacking in Clause 65 of the Bill is the procedure for determining that there has been wrongful misuse of the information. This is an omission which my Bill seeks to make good.
I am glad to say that there is all-party support for this Bill. It is supported by

the Labour Party and the Liberal Party; and many of its proposals emanate from a pamphlet prepared by Conservative lawyers and one prepared by the National Council for Civil Liberties. This wide and growing support shows that there is increasing recognition of the need for some new protection of individual rights and protection against an over-zealous State intruding too much into individual people's privacy. In the changing conditions of contemporary society we need the right to be left alone.
Finally, this is the first time that a Measure such as this has ever been aired in any Parliament. It is thought that the United States Congress and the Canadian Parliament will legislate on these lines, but nothing has been printed so that nothing is yet available. The Bill that we have drawn up is not by any means completely perfect, but I hope that it will be a basis of legislation. Those who have been associated with me in preparing the Bill are very proud of the fact that this is the first time such a Measure comes before any Parliament in the Western world. But it will not be the first time that the British House of Commons has led the way in defending the rights and freedoms of individuals when they have been threatened.

Question put and agreed to.

Bill ordered to be brought in by Mr. Kenneth Baker, Mr. Dobson, Viscount Lambton, Sir Harry Legge-Bourke, Dame Joan Vickers, Mr. Lubbock, Mr. Orme, Mr. Rossi, and Mr. Whitaker.

DATA SURVEILLANCE

Bill to prevent the invasion of privacy through the misuse of computer information, presented accordingly, and read the First time; to be read a Second time upon 13th June and to be printed.

FINANCE BILL

Order for Second Reading read.

Mr. R. J. Maxwell-Hyslop: On a point of order. As copies of the Bill are not available, Mr. Speaker, would you be good enough to read it to the House before we debate it?

Mr. Speaker: We have already dealt with that point. I should be pleased to read the Bill to the hon. Gentleman, but I do not think that the House would be very much obliged.

Mr. Geoffrey Hirst: On a point of order, Mr. Speaker. I quite appreciate that you could hardly read the whole of the Bill, but the whole basis of this debate is to take place under very unsatisfactory conditions. May we be assured at the very outset hat the Chief Secretary will make absolutely clear the precise purpose and extent of the Clauses which he is subsequently to commit to a Committee of the whole House? We must have that absolutely clear at the outset of the debate.

Mr. Speaker: That point will arise after we have taken the Second Reading of the Bill, because a Motion will follow the Second Reading and the right hon. Gentleman in charge will be explaining exactly what is involved. I think that the hon. Gentleman need have no worry.

4.30 p.m.

The Chief Secretary to the Treasury (Mr. John Diamond): I beg to move, That the Bill be now read a Second time.
I was about to say, before the last intervention, that I recognise only too well the difficulty and inconvenience in which some hon. and right hon. Gentlemen are placed and recognise that they will be paying me undue courtesy if they allow me to proceed with a Bill of which not all of them have copies. In other words, I shall try to adjust my comments in such a way as will make the absence of the Bill less inconvenient than might otherwise have been the case. [Interruption.] I think one wants to take the line that there might be hon. Members who have been inconvenienced.
I have the clearest imagination of the point of view that I should be taking and expressing were I still sitting where the hon. Gentleman is sitting. I think, there-

fore, that I owe it to the House to endeavour, as far as I can within the limits of time, to make clear the points to which I want to draw attention, on the assumption that the Bill is not readily available.
For those who have not had an opportunity of seeing it, it is a longish Bill of nearly 200 pages, but size and controversiality do not necessarily go together. I do not think that it will be found to be too controversial a Bill. Many parts of it will, I think, be acceptable. For example, 30 pages are in preparation for consolidation of the Finance Acts, and I think that it would be everybody's desire that they should be examined, and if appropriate approved.
The intention is to introduce later this year two consolidation Bills, an income and corporation tax Bill containing the main provisions, and a taxes management Bill containing machinery provisions. The main Bill is designed to take effect for income tax for 1970–71, and for corporation tax for accounting periods ending on or after 6th April, 1970. The management Bill will come into force on the same day. I think, therefore, we would all welcome the fact that there are all told 44 pages of consolidation and simplification.
The Bill contains about 30 pages dealing with reliefs and reductions in taxes. They, too, I think, will be welcome. There are 29 pages dealing with anti-avoidance measures, and I think that they too, will be welcome. I think that the House will want to make sure that when it passes legislation, as it has done in past years after great consideration and time spent, and has decided where the burdens of taxation should fall, the burden is falling in that way, and that the will of the House is not being flouted. I therefore think it right that if it is represented to me that tax is being avoided, and the provisions passed by the House are not being effective I should bring the matter before the House, at all events for reconsideration.
That leaves 88 pages on new provisions and variations in the taxes. Of those, a number are pressed upon us by trade associations and others who quite properly wish to have adjustments made to help them and to remove difficulties. Whether those 88 pages will be welcome is, I0 think, largely a matter of taste.
There is not attached to the Bill an Explanatory Memorandum. There never is in a Finance Bill, but if there were such a Memorandum it would contain a reference to the staff position. As that information is never given in a Finance Bill, I think it right for me to say that the net staff requirement in the current year, taking into account all the provisions of the Bill, will be small and can be accommodated within the terms of the Prime Minister's statement of 26th February. When one looks further ahead, the proposals tend to reduce the staff requirement below what it otherwise would have been.
I turn, now, to some of the major provisions of the Bill. As the House is aware, there is no alteration in the rates of income tax and surtax, but some very helpful reliefs given there, especially at the lower end. There are some increases in indirect taxation, but the weight of taxation all told, including direct and indirect, results in a further small move away from inequality. I am sure that the House appreciates that there is a greater buoyancy of the revenue so far as direct taxes are concerned rather than indirect, and that even if one merely wishes to maintain some balance between direct and indirect taxation it is necessary from time to time to increase indirect taxes, and indirect taxes alone.
The Bill provides for an increase in corporation tax, an increase which I gather from subsequent comments was anticipated. I think that there is every justification for seeking that contribution from the business community, and I want to explain why I say that.
It is true that during the past year more dividends have been restrained. I have paid tribute to those who have co-operated 100 per cent. in achieving that, and that is still the present position, but the restraint on dividends does not mean that profits have not risen. Indeed, they have. In 1968, they were £500 million, or about 11 per cent., above the previous year. In 1969–70, it is expected that profits will be higher still.—[Interruption.] The hon. Gentleman is talking about real terms. I shall compare like with like. Against that increase of £500 million, the increase in corporation tax amounts this year to £75 million, and in a full year to £120 million.
Another comparison is the total amount of ordinary dividends paid. In 1968, these amounted to £1,670 million. Corporation tax falls on profits, and it means that the additional 2½ per cent., £75 million, or in a full year £120 million, will fall on these total profits which last year were £1,670 million. I do not think it can reasonably be said that profits cannot accommodate or digest the additional burden of corporation tax.
Nor can it be said that the additional burden of corporation tax cannot he borne because of the lack of liquidity of companies. I understand that over the last two years companies have added about £850 million to their financial assets. Thus, when one compares £75 million or £120 million with that, again it is right to say that companies are still able to bear the additional corporation tax.
It will have a useful and beneficial effect on consumption. It will have a useful, though small, beneficial effect on the balance of payments. It will not, I feel sure, have an ill effect on investment, something about which one has to be very careful, because our need to plough back profits and invest more is accepted on both sides. I do not think that it will have an ill effect there. The evidence one has—the most useful piece of evidence being the investment intentions collected by the C.B.I.—is that investment is rising, and, indeed, that those intentions are the best since 1960. I therefore do not think that there is undue cause for anxiety.
Nor will the increase have a damaging effect on costs or our export capacity, because the corporation tax increase will fall on profits. It will not affect costs, nor will it damage our exports, and in any event we still have the situation of about a 7 per cent. differential advantage as a result of devaluation.

Mr. Hirst: This is not the moment to argue the right hon. Gentleman's erroneous economic thinking, but he must appreciate that if increased profits are made by industry they pay increased tax at the same rate of corporation tax. It does not have to be increased. It is monstrous to suggest that it should be, because all tax is a charge on costs.

Mr. Diamond: As the hon. Gentleman rightly says, this is not a suitable medium


for exchanging views. I hope that he will pay me the courtesy of listening to what I say and I shall look forward to hearing him, even though his views do not entirely coincide with mine.
I should now turn to the provision about loan interest, as this is a major departure and is related to the Chancellor's economic action. In his Budget speech, my right hon. Friend drew attention to the large expansion of credit in the domestic economy, which had resulted in 1968 from the growth in money supply and the balance of payments deficit. He said that the expansion in domestic credit had been a great deal more than we could afford, given the need to switch resources into the balance of payments, and that we could not allow credit to be supplied on anything like the same scale in the coming year.
One element in the credit extended to the domestic economy is, of course, bank credit, and the Chancellor has made this contribution to restraint here by a reversal of the central Government's borrowing requirement, so great that the public sector—not just the central Government—will be reducing rather than increasing its total outstanding debt this year. This should make it possible for the Government substantially to reduce borrowing from the banking system.
As regards bank credit to the private sector, the reduction in the advances of the London clearing banks in April showed that they had made further welcome progress towards bringing their restricted lending within the 98 per cent. ceiling. Indeed, they were left with only about £50 million to go, but getting within the ceiling does not mean that credit restraint can be relaxed. The banks will, I hope. be assisted in the hard and ungrateful task of saying "No" to their customers—no one is better able to sympathise with them in that difficult task than one who, in his professional capacity, must do it day by day—by the provisions in the Bill withdrawing tax relief on interest paid by personal borrowers.
When we are asking the banks to make strenuous efforts to cut back on inessential overdrafts for personal consumption, it is paradoxical that a considerable part of the cost of those overdrafts should be met by the Exchequer—

Mr. Reginald Maudling: The right hon. Gentleman is putting forward

this change of interest payments as part of the credit squeeze. May we take it that, when the credit squeeze comes to an end, it will be reversed?

Mr. Diamond: The right hon. Gentleman cannot take that. He can always be relied on to interrupt a speech when he has heard the first part of the argument, on the assumption that it cannot be followed through. I hope that he will be a little more patient. He does this every time, without exception.
I hope, therefore, that I may continue to explain that what the Chancellor referred to was the need to discourage private consumption by discouraging both the borrower and the lender. Also—as I shall make clear, if the right hon. Member for Barnet (Mr. Maudling) will allow me, as I explained in my Budget speech—the restoration of the old arrangements for distinguishing between what is business expenditure and what is private expenditure and applying that to bank interest is a sensible and overdue arrangement.
I do not recollect which right hon. or hon. Gentleman said it—I think that it was the right hon. and learned Member for Wirral (Mr. Selwyn Lloyd)—but he said, interestingly enough, that this was a matter which had been reviewed every year by Chancellors when the Opposition were in power. That was surprising to me. Of course, no Minister of the present Government would have any means of knowing whether that is true, and I could only take it from what the right hon. and learned Member said. I should be surprised if it were so, but, if it were, it would merely underline my point that this is due not only on grounds of sensible, fair tax principle, but also, very timely, in relation to our present circumstances. I hope, therefore, that I have fully answered the right hon. Gentleman's intervention.

Mr. Maudling: Since the right hon. Gentleman has said that this was reviewed every time by previous Chancellors, may I tell him, for his own information, that that is quite untrue?

Mr. Diamond: I am grateful for what the right hon. Gentleman says. I will check to see who said it. My recollection—it may be wrong—is that it was


the right hon. and learned Member for Wirral.
The proposal about the adjustment of the tax provisions concerning the deduction of interest on private borrowing will result in a further tax yield of about £25 million in a full year. I have found that, although this proposal has created a great deal of interest as to the detail, it has won surprisingly general acceptance on the principle. In fact, many people have said to me, "We could never understand why this was not done before." That is interesting, in view of what we have just been talking about.
The objection, of course, is to a change—one is familiar with objections to any change—but before one objects to this change one should examine the present situation. If it were ideal, there is a good argument for not changing it. If—as I shall argue—it is both unfair and irrational, one cannot rely on it as a satisfactory solution of our problems.
It is irrational because not all forms of interest at present attract tax relief. Annual interest does; short interest—that is, on a loan repayable in less than one year—does not. On the other hand, interest payable on an advance from a bank or from a stockbroker, for example, be it short or long, is allowable.
It is unfair because, as has been said, when a man buys on hire purchase in a way in which he cannot buy on credit because he has not the substance to be held credit-worthy, the interest involved is not allowed, and the interest, as anyone knows who has troubled to make the calculation, is very heavy. If he buys on credit, being a person of substance and credit worthy, and pays interest, the interest does attract relief.
So the situation is the familiar one that those who have means pay least because they get tax relief on their interest and those who do not have means pay most, particularly if they are buying on hire purchase. Thus, the present system has very little to recommend it and the new one will be both more logical and more just, in addition to serving our economic needs.
Four arguments were advanced against the new proposals. The first is that, as the interest receivable is taxed as part of the income of the lender, the interest

payable should be allowed from the taxable income of the borrower. But if one were to accept that basis, what one pays one's solicitor, for example, which is part of his taxable income, or what one pays one's accountant, which is part of his taxable income, should be deducted from one's own tax assessment. That is not so—

Sir Gerald Nabarro: So it should, in some cases.

Mr. Diamond: I pay great respect to what the hon. Member says, but he is familiar with the provisions and practice of the taxing acts, and the tax code and he knows that there is a clearly drawn line between what is spending out of one's income and what is spending to earn one's income. These examples are just the ordinary ones of spending out of one's taxed income, and there are a host of others of the same category. There is no principle in the tax code that what the recipient pays tax on, the payer should get relief on.
The second argument which is put forward is that where a loan has been used to buy income-producing assets the interest on that loan should be treated as a deduction for tax purposes. Again, this would mean restoring the regressive nature of the existing relief. It would mean that anybody who had some capital and borrowed money could claim the interest for tax purposes, whereas anybody who did not have capital would not be able to claim the interest.
I am told—I think that it was the right hon. and learned Member for Wirral who said this—

Mr. Maudling: indicated dissent.

Mr. Diamond: —that we would have enormous difficulty in drawing the line between what is a business expense and what is not, a line which must be drawn in deciding whether or not interest is allowable.
However, this is a familiar problem which exists among a host of expenses, in addition to interest matters which form a regular part of the function of the Inland Revenue. This is sorted out with the assistance of accountants and other members of the profession. There are well-established rules and cases which help to decide whether interest is wholly allowable or disallowable or


whether a portion of it is allowable or disallowable. I do not anticipate any undue trouble on that score. Thus, this argument does not alter the justification which I am putting forward for the new provisions.
The third argument which is put forward—I am certain that this was adduced by the right hon. and learned Member for Wirral—is that one could have saved all these problems if one had merely withdrawn the tax relief applying to surtax payers. I will deal with the practical difficulties of this, and they are many, but meantime suffice to say that the present proposal is estimated to raise £25 million in revenue, apart from its other beneficial effects. To restrict it to surtax only would mean raising additional revenue of £5 million and, therefore, the suggestion is not worth a candle. I note from the twinkle in the eye of the right hon. Member for Barnet that he immediately recognises the point of my argument, which reveals the wide spread that exists.
It will be seen that this arrangement will fit in well with the Chancellor's proposals. One exception that we are making to what I believe is a logical and just scheme is in connection with social policy. We are proposing the continuing encouragement, through tax reliefs, of savings as represented by the purchase and improvement of housing. This exception will apply to money used to buy, for example, a caravan or mobile home on which local rates are paid. Where there is a bridging loan, the interest on both that loan and the loan which replaces it will qualify for relief.
Moreover, where, in general terms, a loan is raised to pay off a qualifying loan, interest on the new loan will equally qualify. Provided that there is a reasonable connection in time and amount between incurring the debt and the relevant expenditure on the property, the appropriate relief will be allowed from the inception of the loan, even if it takes place shortly before the incurring of the expenditure.

Mr. Joel Barnett: Would my right hon. Friend tell us what he considers to be a reasonable period of time?

Mr. Diamond: I do not think that my hon. Friend would expect me to do that.

[HON. MEMBERS: "Why not?"] In practice, it is not difficult, by the ordinary process of question and answer, to find out whether a transaction was entered into "whole"—that is, whether the money was borrowed for a particular purpose or for another purpose and has been subsequently switched. That can be discovered without too much difficulty.
I am making a simple point. We do not wish to be inflexible about this and, as long as the intention is to enter into one transaction, there will be no difficulty.

Sir G. Nabarro: rose—

Mr. Diamond: I will give way to the hon. Gentleman later.
I was saying that there would be no need for the two parts of the transaction to be absolutely contemporaneous. I also wish to make it clear that what matters for this purpose is not the asset on which such a loan might be secured but the purpose to which the money is devoted. For example, a loan secured on a life policy will qualify if the loan is spent on buying or improving a house. On the other hand, a loan secured on a house will not qualify if the money is used for ordinary consumer expenditure.
Perhaps I should add that the relief need not necessarily be limited to the original borrower. Where a successor in title, such as a widow, takes over both a house and the liability to pay the interest, that interest will qualify for relief. Similarly, once a borrower has parted with the property, no further relief will be allowed, although interest may have to be paid if the loan happens to continue. There will no doubt be other details concerning this matter, but we can go into them in Committee.

Sir G. Nabarro: Clause 19(4) contains these curious words:
If interest is paid at a rate in excess of a reasonable commercial rate …
In present conditions of extreme stringency of credit, through most orthodox channels interest rates are varying from between 9 per cent., being Bank Rate plus 1 per cent., for a loan from, say, a joint stock bank, to as high as 18 per cent. or even 20 per cent. for a medium-term loan for the same purposes from non-banking institutions. How are we to interpret a "commercial rate"?

Mr. Diamond: The interpretation of a commercial rate is a rate which is payable in commerce.

Sir G. Nabarro: What does it mean?

Mr. Diamond: The hon. Gentleman is asking me to say what is reasonable. Nobody is better equipped than himself to answer that.

Sir Arthur Vere Harvey: The right hon. Gentleman will be aware that industry is today not necessarily going to the banks to raise money to meet the import deposit charges but is going to finance houses, where it is having to pay between 14 and 15 per cent. Would he consider that to be a commercial rate?

Mr. Diamond: The question would not arise if it were a business.

Sir A. V. Harvey: Is 15 per cent. a commercial rate?

Mr. Diamond: There will be no difficulty. [HON. MEMBERS: "Answer."] We can go into the full details of this in Committee, at which stage I will answer the individual questions asked by hon. Members. It would not be helpful for me to attempt to qualify what I have said on this issue at this point.

Sir Charles Mott-Radclyffe: The right hon. Gentleman has an advantage over me in that he has a copy of the Bill and I do not. Can he justify an anomaly by which, in terms of agriculture, the purchase of a new farm or the improvement of an existing one by bank loan will qualify for tax relief whereas the maintenance of existing buildings will not? Does he think that that state of affairs will be in the best interests of the Government's agricultural policy?

Mr. Diamond: I am not sure that I share the hon. Gentleman's views, but I will look carefully into what he has said.

Sir C. Mott-Radclyffe: Will the right hon. Gentleman give me a straight answer?

Mr. Diamond: Certainly. My answer is that I am not sure that I share his views.

Sir C. Mott-Radclyffe: If the right hon. Gentleman will study the Bill he will

see the point I have in mind and the situation that arises.

Mr. Diamond: I said that I would look into the matter carefully. My first reaction is that I am not sure that I share the hon. Gentleman's views as to the present state of the law. However, I will be glad to look into the matter. The hon. Gentleman would not want a Finance Minister to give an authoritative reply "off the cuff". He would expect me to pay him the courtesy of considering very carefully what he said.
Time is short and I come to the provisions applying to close companies because, here again, I believe that what is provided in the Bill is widely welcomed, although I do not think that we have removed the misconceptions which we wish to remove.
The misconception to which I am particularly referring—I would call it a myth rather than a misconception—is the myth which persists in regard to shortfall assessments. A shortfall assessment is an assessment which arises when a business has not, in the view of the Revenue, declared a dividend which is appropriate in the circumstances of the business. The allegation is made, first, that the needs of the business are not considered when making a shortfall assessment and, secondly, that treatment varies as between one part of the country and another.
I do not think that there is any dispute between the two sides of the House about the need for shortfall assessments based on some criteria. This has always been the case and nobody would deny that it would be a major source of tax avoidance if close companies—one-man companies, family companies, call them what one likes—were allowed to carry on the activity of being money-boxes. What the law tries to do, therefore, is to envisage the situation which would have arisen had the shareholders and directors been at arm's length instead of being, as in the situation of a close company, one and the same person.
That is the test which is applied. The law makes absolutely clear that in considering whether there has been an adequate distribution the requirements of the business are to be taken into account and "requirements" means not only current requirements, but the requirement for maintenance and development of the


business. If, therefore, a business is able to satisfy an inspector of taxes that the whole of the profits it has made for a particular year are needed within those words, then, of course, it need not, if it does not want to do so, issue a dividend of any kind and no shortfall assessment will ensue.
If, on the other hand, it does not need a penny of the profit which it has made for business purposes, but could distribute the whole lot, 100 per cent., it does not need to declare 100 per cent. If it declares 60 per cent. that satisfies the standard laid down in the Act. The situation is that the full needs of the business, both current and development needs, are fully taken into account. The arrangements, as far as I am aware, are sensible and working well. Certainly, the arrangements are much more lenient than they were in the pre-corporation tax era.—[An HON. MEMBER: "Rubbish."] It does not help the case for an hon. Member to say, "Rubbish". I am referring to the Act which did not provide for a 60 per cent. standard. I am referring to a situation in which the Revenue had no latitude whatever.
If there was a case where 20 per cent. was paid and the Revenue was able to satisfy the appellant tribunal that 40 per cent. should have been paid, 100 per cent. was deemed to be distributed; the Revenue has no latitude whatever. It was the dividend declared or 100 per cent. That is what I mean when I say that it was less lenient under the arrangements of right hon. Gentlemen opposite. The arrangements now are more relevant to business needs and so far as I am aware they work perfectly fairly, but we have not yet been able to extinguish this myth. Unfortunately, the right hon. Member for Barnet gave it voice as recently as 21st April. He said then:
We welcome the close company concessions, but we are not sure that they go far enough. They leave the patchy administration of the short-fall computations which is causing considerable difficulty to many small close companies in different parts of the country.
HANSARD records that I intervened with rather more brevity than courtesy to say "Quite wrong" and the right hon. Gentleman responded:
I invite the right hon. Gentleman to ask the people who know."—[OFFICIAL REPORT, 21st April, 1969; Vol. 782, c. 144.]

That I want to record, because I have been asking about this for two years. It started by the Father of the House, late in 1967, asking a Question relating to this topic. He asked whether I would look into the matter and receive a deputation. I said that I would do so. This was followed by the hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin) asking, in November, 1967, whether I would be willing to consider this matter which was causing difficulty in regard to export houses at that time. I said that I would go further and would be glad to receive a deputation. These deputations have not materialised.
The hon. Member made it clear that there was a misunderstanding and this was not the point which was troubling export houses. That is the point I am trying to make. I am not running away from it; I am trying to make it. The House has heard me many times explain that there is no reason for a company to declare a dividend of any kind if it needs the whole of its profits for business purposes.
I go further. The Financial Secretary has helped me in this. He and I both have the good fortune to attend many trade association dinners and accountants' gatherings. Time and again one or other of us has been told, "These shortfall assessments are difficult and I have heard of cases where there is a problem". In each case my hon. Friend's reply and mine has been precisely the same, "If you have a case, let me have details of it and I will look into it". My hon. Friend the Financial Secretary is gracing our benches at the appropriate moment. Neither he nor I has ever received such a case.
I am referring to two years' experience. The right hon. Member for Barnet has alleged a number of cases of many small close companies in different parts of the country. If he will be good enough to give me those cases I will look into them. If he does not produce the cases—or it transpires that there has been an error, as on a previous occasion on the Opposition Front Bench—I hope that he will support me in explaining that we need small, young growing businesses to go ahead with their business needs and business development.

Mr. Maudling: I agree that, in general, this certainly is so. I know that many


companies are not forced to distribute, but I have met at chambers of commerce and in other places people who do net understand this. I met a case the other day of someone who did not make an appeal, because his accountant advised him that it was not worth while appealing to the Revenue.

Mr. Diamond: I hope that the House will bear with me on this. The experience of the right hon. Gentleman tallies precisely with mine. We go to chambers of commerce and other gatherings and someone starts talking about these cases. I have always followed it up by saying, "Will you please tell this accountant you know about to get in touch with me and to put a case forward?", but none has arrived. The right hon. Gentleman is saying that at first-hand he has knowledge of cases which are working well. The only complaints he has are at second-or third-hand. He does not know them at first-hand. I am not seeking an argument with him, but I am seeking his co-operation in explaining to the business community that if there is a misunderstanding we both are anxious to have it removed.

Mr. Maudling: Perhaps one should get such a firm to change its accountant?

Mr. Diamond: That is something on which I would not wish to comment.

Mr. Barnett: Before my right hon. Friend leaves the question of close companies, may I interrupt him? As he knows, I entirely agree with all he has said and I am grateful for the relief he has given on remuneration, for which I have been pressing from the beginning. It would be useful to know whether he would be prepared to accept an Amendment, because now apparently this will be done on a time apportionment basis. There are many close companies where the directors draw a weekly or monthly salary throughout the year, then allocate a bonus. If this is allocated after 15th April, it will be assessed on a proportionate basis instead of the whole bonus being allowable as a deduction.

Mr. Diamond: My hon. Friend knows that I will consider carefully and sympathetically any Amendment he wishes to put forward. Sometimes, unfortunately, one has to reject such an Amendment, but

that is very rare. I shall be glad to consider this problem if he will drop me a note or put down an Amendment—preferably drop me a note in advance.
Finally, I turn to selective employment tax, because I find one or two lingering doubts left in one or two quarters. I would like to remove them, if I can. I shall not delay the House by repeating what I said in the Budget debate. Everybody is familiar with the main salient points. Everybody knows that the tax produces more than £600 million a year. The alternatives would be to put standard rate income tax up to 10s. in the £ or to increase purchase tax by more than 50 per cent. through all the categories. S.E.T. is cheaper to collect than other taxes. Its impact on the cost of living is less than that of other taxes, and evidence is accumulating that it encourages efficiency. The House is very familiar with all that.
I want to move to the next stage. When these matters were last discussed I was asked why it is not applied to manufacturers as well, if it is a successful tax. It was gratifying to think that some hon. Members opposite were prepared to consider that it was such a good tax. It is not a very logical argument, if one is basing one's case on the selectivity of a tax, to say, "If it is such a good selective tax, why not make it unselective?" The reason for not making it universal, as has always been said from the day the tax was introduced, when the Opposition were considering an overall employment tax or payroll tax—I do not know whether they still are—is that such a tax would immediately put up prices all round. An employment or payroll tax would have exactly the same effect as an increase in wages. If it were overall and universal, it would immediately have the effect that prices would go up proportionately.
If what is being asked is whether it would be sensible to have a selective employment tax on manufacturing industry alone, a tax that is selective in that way as opposed to services, and if we are asked why we differentiate between the two, the answer is that the two industries do not function in the same way as regards production and arriving at prices. Putting this in its simplest terms, I remind the House that a manufacturing industry fixes its prices by reference to its prime costs—labour and materials, adding a


percentage for overheads. [Interruption.] The manufacturer also takes account of whether he can sell his product, as the hon. Gentleman says. Everybody must have a price list. The manufacturer then considers whether it would pay him to reduce the price and sell more; whether he would recover his overheads better in that way.
The point I am making is that if there is an increase in prime costs the manufacturer immediately adjusts his selling price. If there is an increase in overheads, such as rates, which are a form of local tax as opposed to a national tax, he does not increase his price straight away. He may consider whether he would do better to reduce his price, maintain it, or increase it to cover his overheads as a whole, because the more he sells the more profit he will make, since the overheads are fixed.
That is the very simple situation with regard to arriving at the price. In a service industry such as distribution the prime cost is only the article that is bought in the first place. The whole of the labour cost of an employer in a service industry is an overhead. It is not like a manufacturing industry, where the majority of the labour is direct labour. Therefore, the price of the article is fixed by reference to the price paid plus the established mark-up, and if there is a variation in the elements which go to make up his overhead expenses he cannot adjust his mark-up automatically, nor does he try to do so. Both economic theory and accountancy experience march hand in hand here with the experience of the tax. Instead of the distributor's price being adjusted by reference to an increase in an element in his overheads, the increase is not passed on in that way.

Mr. A. P. Costain: Can the right hon. Gentleman explain how he relates what he has just said to the building industry? Does he recall that the then Minister of Public Building and Works said immediately after the Budget that S.E.T. would put £30 on the cost of a house? That does not coincide with what the right hon. Gentleman has just said.

Mr. Diamond: I was making the case in its simplest form. One must sometimes do that so that it will be readily under-

stood. But I am grateful to the hon. Gentleman. He has been good enough to listen to me and follow the argument, and he distinguishes, as I do, between construction and distribution.
In construction, the hon. Gentleman has direct as well as indirect labour, and, therefore, the effect of the tax on the efficiency of construction is not so marked. But he will know from his experience in the industry that the effect is marked, and that efficiency has grown much more rapidly during the period of selective employment tax than it did before. This does not prove anything conclusively, but it is a happy thought that the imposition of selective employment tax has had that beneficial effect.
The cost to the Government of collecting S.E.T. is one-third that of collecting other taxes. That is a remarkable difference, especially since at first blush one would not expect this to be the case, because it is curious to collect a tax from a large number of people from whom one does not want it and then repay it after a period. When I made that point previously I was challenged on the cost borne by the taxpayer. I thought that that was a reasonable question, and so I considered what that cost was likely to be.
One has some experience in this. For example, one thinks of the substantial cost borne by the taxpayer as a result of the pay-as-you-earn provisions. Every employer has to alter his wages records and so on especially to enable this to be done. Many hon. Members will recall the tremendous fuss and the examinations by the House and Committees of the House when pay-as-you-earn was introduced.
I also invite the House to consider the cost of purchase tax collection, where the wholesaler must keep special records purely for the purpose. I invite the House to consider the cost in regard to income tax, where agreement on the tax payable by a company or an individual of substantial income takes hours of his time and often hours of his accountant's time. [Interruption.] I agree that investment grants also involve a considerable time. I also think of the cost of estate duty and the time of solicitors, counsel and accountants involved.
When one thinks of those things one realises what a large cost falls on a


number of individuals when paying purchase tax, pay-as-you-earn income tax, Schedule D, estate duty and so on. One then compares that with the likely cost falling on the individual in the collection of S.E.T. All that a manufacturer has to do is to add up at the end of the quarter the amount paid, make one application, and receive it back in about 10 days. If the payer is in the tax-bearing sector, he has to do precisely nothing. There is no other tax where the cost of paying it is nil. No interest is involved as far as the tax bearing sector is concerned.
All the payer has to do is to buy a stamp, which he would in any event buy. It is differently marked and costs a different sum of money. There is no single additional administrative cost or overhead. It must, therefore, be the case, although one cannot assert it too strongly without an opportunity of examining individuals in the private sector, which is denied to me, that the cost of paying the tax is much less for the S.E.T. than for other taxes. I repeat, therefore, that the S.E.T. has these additional advantages to its benefit.

Mr. Norman Haseldine: Although I know that my right hon. Friend does not accept the argument, does not he concede that, if a payroll tax were inaugurated, one would still have an easy method of collection?

Mr. Diamond: A payroll tax would not be anything like as easy or as inexpensive to collect as an employment tax, which is a fixed sum for each employee. A payroll tax has to be calculated by reference to each employee's wages, which may vary from week to week. There are also problems of collection. It would merely result in increased costs and prices.

Sir G. Nabarro: Surely that alleged cheapness of the cost of collection of the S.E.T. is only because the whole of industry is giving a vast tax-free loan to the Government for many months out of every calendar year.

Mr. Diamond: It is giving an interest-free loan. The hon. Member has been good enough to listen to my case and it is interesting to note that he is not disputing that administrative cost is not there. He is complaining about the interest-free loan. I think that he is right.

I think that most people have that in mind. The essence of and reason for the complaint is the interest-free loan. Of course, it is true that there is an interest-free loan. But this is why the tax is levied at the rate it is. If the Government are in receipt of a benefit arising out of a particular tax at a certain level, then, if they did not have that benefit, the tax would be at a different level. It is as simple as that. It is taken into account in the rates.

Sir G. Nabarro: It is a new doctrine

Mr. Diamond: It may be a new doctrine. I am sorry that the hon. Gentleman has not given it thought. It is a simple doctrine which applies to a number of taxes and I am glad that I have been able to explain to him something new.

Mr. Richard Wainwright: In his Budget Statement the Chancellor announced the exemption from the S.E.T. of certain important waste processing trades, such as metal and paper. In which part of the Bill is this provided for?

Mr. Diamond: Offhand, I do not think that I can help the hon. Gentleman on that. I do not think that it is in the Bill at all. I think that it is done by order by my right hon. Friend the President of the Board of Trade, but I will make sure and let the hon. Gentleman know.

Mr. John M. Temple: What progress has the right hon. Gentleman made in talks with the building societies about their support of the contractual savings scheme?

Mr. Diamond: I have nothing to report on that at this moment, but I take note of what the hon. Gentleman says. I recognise his interest.
I hope that I have been able to say what I have to say, in the context of what may be, in certain cases, an absent Bill, in a way which has enabled right hon. and hon. Members to understand the main issues.

5.25 p.m.

Mr. Patrick Jenkin: While we have many complaints about the Chief Secretary to the Treasury, we must admire the dogged persistence with which he returns to the


defence of his beloved selective employment tax. He said that a number of people have lingering doubts about it even after the speech he made in the Budget debate. That was the understatement of the year, considering that the increase in the tax produced a catastrophic fall in the Government's majority on the relevant Budget Resolution, in the prompt sacking of the Chief Whip and in his replacement by the right hon. Member for Bermondsey (Mr. Mellish). In view of all that, all I can say to the Chief Secretary is, "Some doubt! We have heard from the hon. Member for Bradford, West (Mr. Haseldine) an indication that many hon. Members, and not only on this side of the House, remain totally unconvinced of the case for the S.E.T.
The right hon. Gentleman dealt with the increase in corporation tax equally unconvincingly. If one increases the rate of corporation tax, either the amount is going to be met out of retained profits and so reduce the amount available for ploughback, or it is going to be passed on in higher prices to the consumer. These are the two alternatives and it is the height of naivety for the right hon. Gentleman to argue that this is not going to have any effect on the propensity of industry to invest.
The survey to which the right hon. Gentleman drew attention was taken well before the Budget and in some cases before the effects of the November measures can possibly have had their result. Every single forecast of investment that the Government have made has turned out to be over-optimistic. We should be delighted if on this occasion the opposite were to happen and we really did get an upsurge of investment. But if it happens it will be the first year since the Government took office in which we shall have had an increase in the ratio of investment to gross national product. It will be welcome if it happens but I shall wait until I see it.
The Second Reading of a Finance Bill tends sometimes to be a bit of a nonevent. It comes halfway between the Budget debate and the Committee stage. It is too soon to review the Chancellor's Budget judgment, and we shall have an opportunity of doing so in the regulator debates in Committee, when we shall have had a few more economic indicators such

as the unemployment and trade figures. Equally, it is inappropriate that we should look too closely at the details of all the Clauses and Schedules. These are better left to the Committee stage, particularly as on this occasion many hon. Members have not got the Bill in their hands. So, instead, I want to comment on certain general aspects of the tax system and fiscal procedures which do not always get the attention they deserve, but before doing so I wish to deal with two special matters.
First, the right hon. Gentleman did not mention the astonishing statement that we had yesterday from the Secretary of State for Social Services. It was reported on the tape this morning that the Secretary of State, in dealing with the row which has blown up between himself and his supporters, has confessed to maladroit timing. Hon. Members opposite have been fiercely critical of him not because of any national interest which may be involved but because they think that his statement has damaged even further their prospects in local elections this week. That is their problem, however, and I shall not intervene in the love-hate relationship between the Secretary of State and hon. Members opposite. However, I am bound to ask one question which is of wider interest.
I hope the Minister of State will be able to answer this when he winds up the debate. Why was this statement about the health charges not included in the Chancellor's Budget Statement? It was reported credibly by the political correspondent of The Times that this decision was taken months ago. The political correspondent of The Times said this morning:
I understand that the decision in principle to raise the charges was taken six months ago, and Mr. Crossman himself had not appreciated until yesterday morning that it would emerge from the administrative machine after Question time.
Now, I understand, the situation has been further complicated because the right hon. Gentleman is reported as saying on "The World at One" that he had hoped that the announcement about increased charges for dentures and spectacles would be made in the Budget speech. Why on earth was it not made then? Who vetoed the statement?
Was it the Chancellor or was it the Prime Minister? Why was it that we


had the announcement about pensions with no figures about contributions, yet here is the Secretary of State saying that he had hoped that his health statement would have been included in the Budget Statement? Was it perhaps because only the day before the Budget the right hon. Gentleman had said in answer to his hon. Friend the Member for Sheffield, Heeley (Mr. Hooley):
If my hon. Friend is asking me whether I expect further charges to be imposed on the Health Service the answer is 'No'."—[OFFICIAL REPORT, 14th April, 1969; Vol. 781, c. 771.]
This episode has been represented in the Press so far as one of the right hon. Gentleman's outstanding political gaffes. If the information in The Times is correct, and the decision was taken months ago, if the report on "The World at One" is right, that the hon. Gentleman had said that he had hoped that this would be in the Budget Statement, it seems that he has a great deal more to answer for than a political gaffe. In his reply the Minister of State must come clean and tell the House the whole sordid story behind this disgraceful episode. Have Ministers merely been guilty of muddle or is their behaviour a good deal more devious than that?

Sir Cyril Osborne: Why did the Prime Minister not tell that to his captive audience on Sunday?

Mr. Jenkin: It has been suggested that the Prime Minister did not know anything about this, and that would not surprise me.
There is one aspect of the Budget judgment, to which the Chief Secretary referred, upon which we want some further elucidation. So far this has not had the attention it deserves. I refer to the Chancellor's intention that the Government should this year become a net repayer of debt on a massive scale—I think his figure was £807 million. He has said nothing on how this will be effected. The Chief Secretary said in a throw-away phrase that this would be a repayment of debt to the banking sector. The Chancellor assumed that the repayment would inevitably be beneficial to the economy.
Surely this depends on the method. Many people have assumed that this would take the form of a purchase, or

redemption, of gilt-edged held by the non-banking public. I hope that the Minister of State will be able to enlarge on what the Chief Secretary has said; namely, that the Chancellor is proposing to redeem Treasury bills as they fall due and then not reissue them. If this is the case, what will be the effect on the liquidity of the banking system? Treasury bills, as I have always understood it, have been part of the liquidity ratio which the banks are required to maintain as part of their compliance with Government policy.
If there is to be a massive reduction in the amount of Treasury bills outstanding, is it not the case that that will of itself represent a further harsh twist in the credit squeeze? We are talking about very large figures; £807 million is more than twice as much as the amount by which the Chancellor is increasing taxation in a full year in this Budget. We must have some indication of what the Chancellor's intentions are over this massive repayment.
I turn now to more general matters, with a brief look first at some of our fiscal procedures. The right hon. Member for Devon, North (Mr. Thorpe) in his speech in the Budget debate called for a wide-ranging Select Committee. My right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd) thought that perhaps a more narrow-ranging Select Committee would be useful. Both were looking for ways of supplementing our existing machinery for promoting tax reforms. I want to look at a slightly different aspect.
My experience has been confined to debating the Finance Bill from this side of the House, and, last year, in Committee. Even in that short time I have become convinced that the way in which we legislate our changes in our tax laws does this House and the system we operate little credit. Like many hon. Members, perhaps more than some, I have regular dealings with those in commerce and industry and in the professions who have to operate the laws which we pass. I find, almost universally, a deepening despair at the mounting complexity of our system; at the appalling complications of the mass of anti-avoidance legislation which comes on to the Statute Book every year; at the sheer unintelligibility of many of the sections


and schedules which we pass into law. I find a rising concern for the amount of discretionery legislation which is being passed—inspectors being given wide powers, which they may or may not use as they choose; Ministers empowered to impose taxation or to exempt from taxation, simply by departmental fiat.
I find a growing resentment at the increasing tendency of Governments to legislate retrospectively, not merely to cancel out the skilful avoidance devices of the professional tax avoiders—it has always seemed that retrospective legislation may be defensible in those circumstances—

Mr. Hirst: Why?

Mr. Jenkin: Perhaps we will pursue this later. I know that my hon. Friend has long campaigned on this issue. When retrospective legislation is used to upset well-settled, long-sanctioned arrangements, sensibly entered into in good faith and relied upon to give effect to legitimate transactions, then it is totally unacceptable. We have had too much of it.
I find a growing anger at the sheer "hit and miss" quality of some of the Clauses which we enact, Clauses aimed at preventing unacceptable tax avoidance by the wealthy which end up penalising entirely innocent taxpayers with very modest incomes and means. Clauses aimed at taxing transactions of one sort are used to catch transactions of a wholly different sort never contemplated when the Bill was going through Parliament.
Most serious of all, I find that the high standard of tax morality which for so long has held sway in Britain is being threatened by erosion, which is the inevitable result of a system which increasingly displays the characteristics I have described. When people feel that the dice are loaded against them, the temptation to retaliate in kind is very strong.
I do not believe that I am overstating the problem when I say that if we go on as we are there is a real danger that the system will break down with catastrophic results for every citizen. The fault lies partly in the penally high rates which we persist in imposing, resulting in the fact that the rewards for successful avoidance are correspondingly high. Many people engage their energies and ingenuity, and employ top professional

advice, to try to steer a way through the labyrinth—a totally unproductive labour.
In part it is the fault of an over-sophisticated pursuit of absolute equity. A tax system, it cannot be said too often, can be either simple or fair; it cannot be both. We try to pursue equity to an unacceptable degree. But to a major extent the blame lies in the inappropriate procedures by which we choose to put complicated technical fiscal legislation on the Statute Book.

The Financial Secretary to the Treasury (Mr. Harold Lever): indicated assent.

Mr. Jenkin: I am glad to have the support of the Financial Secretary.
Many features of this have been criticised. In his forthcoming book, Sam Brittan tilts hard at what he calls the cult of excessive Budget secrecy. Selective employment tax is a classic example of that. It burst upon an unsuspecting public on Budget day, passed into law two or three months later and now, most people agree, is so riddled with anomalies and nonsenses that the only remedy is to sweep it away and start again. There is the lack of prior consultation, whether of industry or of the professions, which allows the Revenue to insert Clauses into Finance Bills which can have effects wholly different from those which they may genuinely have contemplated.
There is the limiting effect of Money Resolutions. We shall be debating some later. They cut down even the Amendments which may be tabled to relieve the taxpayer of some of the effects of a Bill so that whole issues are never debated. We have even had the operation of the guillotine on the Selective Employment Payments Bill and the Finance Bill last year.

Mr. J. Bruce-Gardyne: My hon. Friend referred to lack of prior consultation in the context of S.E.T. But would he not agree that our experience, for instance, over R.E.P., which the Government always blazoned abroad as a case in which there was prior consultation, proves the complete inadequacy of this, unless the prior consultation is a reality? They had plenty of advice and took no notice of it.

Mr. Jenkin: If my hon. Friend will wait, I have my own solution to some of these problems.
But basically there is the sheer inadequacy of the machinery of debate. Let us not delude ourselves: when we think that we are doing rather well on some complicated Finance Bill Clause, plenty of people outside are completely convinced that we have missed many of the main points—and they are probably right. In this context, it can be seen that proposals to take the Bill upstairs, downstairs or in my lady's chamber are a futile and irrelevant tinkering with the system. We must have less secrecy and more consultation; but above all we must have an opportunity for hon. Members to hear at first hand evidence from the real protagonists in much of this legislation—the Revenue on the one side and the professions on the other—as to the issues and the merits of the legislation which we are considering.
Of course, I would exclude budgetary matters from this. The economic management of the country, the rates of taxation, the scope of indirect taxes are clearly matters which must be left to the Chancellor on Budget day. But the management of the tax system, the introduction of new taxes, the changes in the structure of our tax system, complicated anti-avoidance legislation and detailed method of computation—there is no reason why those should not be discussed openly and publicly before they reach the House.
Speaking entirely for myself, I should like a wholly different procedure. I should like these matters to be referred perhaps to a small Select Committee, which would have draft legislation presented to it. It would hear evidence from the Revenue and from representatives of taxpayers, from the professions, from industry and so on, and it would present a Report to the House which would then be available as a Preamble to the Bill. I stress that this must involve draft legislation, because it is only when legislation is in draft that one can appreciate the real complications, anomalies and problems which are likely to arise.
I cannot believe, for instance, that if this procedure had been followed capital gains tax would have reached the Statute Book in its present hideously complicated form. If a Select Committee had been able to comment on that before the

Government were politically committed to the details, we might have had a much simpler tax.
I have dwelt on this procedural aspect at some length because, while I am not so presumptuous as to believe that it is very original or is a cure-all for our fiscal ills, it is one avenue worthy of exploration through which we might escape from a situation which seems increasingly to embroil us.
This Bill, with its 200 pages, 53 Clauses and 21 Schedules, contains many of the evils of which I have complained. There is the fearful complexity of a whole battery of new anti-avoidance Clauses, about artificial transactions in land, disallowance of trading losses and so on. There is the wiping out of well-settled, long-sanctioned reliefs, so as to defeat existing arrangements. The disallowance of interest on loans falls into this category—loans which have been incurred long before Budget day—and this means that people now face serious problems with their personal affairs.
I should like to mention two difficulties which the Chief Secretary did not mention. Does he realise that by this disallowance of loan interest the Government are kicking away one of the remaining ladders of advancement for the young executive and technologist who is anxious to acquire a share in the enterprise for which he works? In 1967 the Government killed the stock options, and now they are killing loans to buy shares in the firm—arrangements in many cases sanctioned by the Inland Revenue. The Government seem to be driven by a sort of madness to destroy all incentive for rising young managers and technologists, who see no hope of building up savings out of their net income and suffer penal rates of direct taxation.
In the Budget debate, the Chief Secretary claimed as a merit for the Government's policy that it was shifting the burden from owners to earners. This provision and others are calculated to ensure that many earners will never be able to become owners, and that is not a society in which I want to live.
A second point is that this is wiping out a form of tax encouragement to saving through life insurance. The right hon. Gentleman made that clear. Only


last year we debated for hours in Committee a Clause, which the Financial Secretary introduced, regulating minutely the provisions for life insurance, including the question of tax relief on interest on loans borrowed on the strength of policies, and many thousands of people, I am told, have adjusted their affairs in the light of last year's Act. Now they find that Clause 18 has wholly nullified their arrangements. I beg Ministers to realise the sense of fury and frustration which this sort of legislation causes.
Again, there is the Clause intended to deal with the pop stars' much publicised avoidance device. It seems likely, so widely is it drawn, to hit many perfectly genuine business and professional transactions of men who seek to sell part of their business as a going concern. This has rightly been described as "shotgun legislation"—the indiscriminate peppering of a wide area in the hope of hitting the target aimed for, but without too much concern for its effects on innocent bystanders.
It is this sort of legislation which drives accountants to drink—I hope that my hon. Friend the Member for Scarborough and Whitby (Mr. Michael Shaw) will forgive me. We shall wish to probe these matters in Committee, but they seem to epitomise exactly what is wrong with the sort of fiscal legislation which we pass. It should become a major preoccupation of Treasury Ministers to simplify and render intelligible our tax system so that it can be understood so far as possible by ordinary people. But there is no doubt that the high marginal rates of direct taxation have been a major factor in this, and here the Government's record is disastrous.
Ministers are often fond of pointing out—my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) has made this point in a number of articles—that the overall weight of taxation in this country is not seriously out of line with that of our major competitors, but they readily admit that at the higher levels of income direct taxes bear a good deal more heavily on taxpayers here than those abroad. But what the Government will not recognise is the comparatively low level of income at which this discrepancy begins to appear.
For instance, according to a Parliamentary Answer at the end of last year, a married man with two children under 11 earning £2,500 a year—a modest professional or managerial salary—pays 8 per cent. of his income in tax in the United States, 12·6 per cent. in Germany and 22·1 per cent. in the United Kingdom. The figure which I was given for France was just over 5 per cent., which I did not believe, and I have not quoted it, although it may be true.
The Government have made the situation very much worse by a long series of anti-avoidance measures which have had the effect of putting up tax on ordinary incomes—this is something the international comparisons tend to leave out of account—the disallowance of tax relief on covenants, the imposition of fiscal penalties on stock options, the aggregation of minors' income, the 10 per cent. surcharge in surtax which took effect last year and now the disallowance of relief for loan interest. All these weight the system heavily against the United Kingdom taxpayer to an extent which the statistics do not recognise.
Although the standard rate was raised by 6d. in 1965—and that has been the only direct increase in income tax—between 1964 and 1968 the proportion of total personal incomes taken in direct taxation has risen from 10 per cent. to almost 13 per cent., a rise of nearly one-third, and the proportional increase is much higher at the higher levels. This is the effect of inflation on a tax system which is highly progressive. Inflation means that unless rates are reduced or allowances increased year by year the weight of tax presses more and more heavily even though the rates are not put up.
I can illustrate this best by looking at the total tax increases since 1964. The sum of all the increases in rates and new taxes which Labour Budgets have introduced since November, 1964, amounts to £2,620 million; that is to say, that is our estimate of the full-year yield of permanent tax changes introduced by Socialist Chancellors. If the yield of current taxation is compared with the estimated yield of what the 1964 rates would have pro-ducted if applied to the current economy, the result is an increase of more than £3,000 million, and the difference between that figure of £3,020 million and £2,620


million, the additional £400 million, represents the impact of inflation on a progressive system, and that is £400 million more than has been imposed in every Budget but one since 1964.
Socialist Ministers pretend that people have been brain-washed into an illusion that they are heavily taxed. There is no illusion. In 1964 the total proportion of rates, taxes and contributions represented 33·8 per cent. of the g.d.p. In 1968 that had risen to 42·3 per cent.; in 1969 it will be higher still; and we still await the announcement of what the contributions will have to be to pay for the pensions which the Chancellor invitingly dangled before the people in his Budget statement. This must be one of the most disreputable episodes in budgetary hissory. I assure the Chief Secretary, and any who may share his view, that the increase in the weight of taxation from 33·8 per cent. to 42·3 per cent. is no illusion. It represents a burden which Socialist Ministers, Socialist policies and Socialist failures have laid upon the shoulders of the British people.
The evidence now is that some Ministers are beginning to recognise that they have gone too far, and the Chancellor in his Budget Statement recognised that a reduction in direct taxation of high incomes is a high priority. We welcome this sign of enlightenment. But compare it with what the Chief Secretary has been saying. On the last day of the Budget debate he devoted a large part of his speech to justifying high and rising levels of taxation. He said it was all part of the redistributive process and went on to say that the Budget
… will have the effect of reducing the inequality of incomes by a further 2½ per cent."—[OFFICIAL REPORT, 21st April, 1969; Vol. 782, c. 58.]
This is yet another manifestation of the Government's schizophrenia. The Chancellor's high income earners are given a promise of reliefs to come, while the Chief Secretary struggles to retain the support of the rebellious benches behind him by boasting about how the Government have made high income earners worse off. The Government cannot have it both ways. The truth is that under Socialism virtually every taxpayer pays more tax and the prospects of relief get more and more remote.
Under the Tories many taxes were reduced—income tax down, purchase tax down, beer duty down. When increases were made they have been overwhelmed by vastly bigger increases made since 1964.
For instance, in 13 years the car licence went up by £2 10s.; in 4½ years it has gone up by £10. In 13 years petrol duty went up by 10½d.; in 4½ years it has gone up by double that amount, ls. 9d. The Tories got rid of bad taxes such as entertainment duty and Schedule A. The Socialists have introduced bad taxes, such as selective employment tax and betterment levy. The Tories took millions of people out of tax altogether, but even after this Bill becomes law there will be 2 million extra taxpayers over and above those who were within the net in 1964. Socialism and high taxation go together; they have become synonymous in the public mind; and the Labour Party is paying the penalty in every local election and in every by-election which it has to face. This Bill gives yet one more vicious twist to the screw, and that is why we shall divide the House against it tonight.

5.55 p.m.

Mr. Robert Sheldon: The hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin) at the beginning of his speech asked why the announcement of the increased health charges was not made in the Budget speech, and attributed this omission to duplicity on the part of my right hon. Friend the Chancellor of the Exchequer. I find this allegation hard to accept. It would be difficult to find a more politically damaging time than yesterday for announcing the increased charges and therefore no duplicity arises.
The hon. Gentleman has become a recent convert to procedural reform, and I welcome him into the ranks of those who are pressing for the appointment of a Select Committee to examine the aspects of taxation which are amenable to rational discussion and debate without the need for observing secrecy. Two elements in the Finance Bill which might have benefited from examination by a Select Committee are the principle of disallowing loan interest and the principle of selective employment tax, where anomalies exist and where a Select Committee might have reduced the unfairness of operation and the distortion of decision-making by those


affected by the tax, which is harmful to the economic interests of the country. A Select Committee might look at the minutiae and at the principles, and this might be of value in getting the financial legislation that we need.
One problem on the disallowing of loan interest is the discrepancy between capital gains tax and income tax and surtax. At present high income tax payers and surtax payers obtain interest at favourable rates, and this enables them to make capital gains which are taxed at a lower rate. I want to see the rates of capital gains tax and income tax and surtax approach each other, with income tax and surtax coming down and capital gains tax going up. This would have to be a gradual process over the years. In these early years of capital gains tax progress in this direction is likely to be slow, and needs to be, but such a movement over the years is of importance in creating the kind of legislation which is needed because of the different way in which capital gains tax and income tax are treated. It is the increase in wealth which is important, and this kind of sophistication will be required in the corning years.

Mr. Michael Shaw: Why does the hon. Member consider only the possibility of increasing capital gains tax? Why does he not equally consider the possibility of reducing rates of income tax and surtax?

Mr. Sheldon: It is a pity that the hon. Member did not hear what I said. That is precisely what I was saying, that there should be a reduction of income tax and surtax and an increase in capital gains tax so that the gap between them would narrow by the reduction of the one and the increasing of the other. I look forward to seeing such a process come about, although owing to the complexities of the issues which are involved it will need to be gradual.
The present Finance Bill comes before us in the long-term situation which has existed in this country ever since the early 1960's. My assessment of the situation is that the economic problems started in the early sixties and have formed part of a similar pattern from 1962 onwards. The situation has been affected by the loss of advantages which we once enjoyed from the empire, and the need to adjust to our changed position in a world in which we

no longer had these investments and markets open to us.
Perhaps the years of Commonwealth economic development were too protracted, since they permitted a distortion of the industrial economy which was once the pride of our country. Had the process lasted any longer, it may well have produced a distortion which it would have been impossible to correct. But in the last couple of years the Government have been seized of the situation and have taken a number of realistic measures, even if they were rather late in coming.
Among these realistic decisions was the decision to withdraw from our world rôle; the decision to devalue, even though it came very much too late and possibly was inadequate in extent; the decision to restructure industry, even though restructuring may not mean all that much more than that the Minister of Technology looks after the car, computer and other industries, the Industrial Expansion Act, the scheme for shipbuilding, and the setting up of the I.R.C. Though these are limited steps, they are valuable and have led us to move into an area in which we must be involved.
I maintain that we took the wrong turning on prices and incomes in that we tried to introduce certain distortions of doubtful value. I suspect that we may be taking the wrong turning on trade union reform. But at least the Government have shown themselves to be aware of some of the important changes which have been taking place. The adjustment process has gone not nearly far enough. We need to adjust very much more than we have done because much of our present thinking is still geared to the past rather than to current considerations.
Even at this late stage there is a tendency to underrate the magnitude of the problem which faces us. We need time to change our industry, time to change our methods, time genuinely to restructure industry. It may last many more years than the Government or Opposition even suspect at present. In dealing with our balance of payments problem, we need to rephase the debt to the I.M.F. on a much longer-term basis or obtain other loans than perhaps even hon. Gentlemen opposite at present suppose.
The only alternative to this is to live upon doles by the I.M.F., which may prevent our getting the kind of investment which is required. If we are serious about getting real investment in this country, it will produce enormous balance of payments difficulties. Therefore, we need to rephase in a massive way, and the only real way to achieve this aim is to ask for loans on a long-term basis. If loans are not available, then import quotas—not a happy prospect—are one method of reducing the high level of consumption and of producing the increase in investment which will be necessary.
We can take such a step, or we can sink into a pessimistic philosophy that there is something wrong with this country, that we have not the techniques, understanding or attributes of management or of workers, and that we are marked out as somewhat inferior to other European countries. In no circumstances am I prepared to accept that sort of attitude. What we must do is to try other alternatives, however unpleasant they may be for us.
I am worried that the people who have the responsibility to take decisions which may prove unsuccessful may find themselves forced into taking a pessimistic view about what is wrong with our country and may refuse to take the realistic alternatives before us. We need to accelerate the cutting down of our commitments to defend a vanished empire. We need to speed up cuts in Government expenditure overseas—expenditure which last year cost £462 million. How relevant is such expenditure to our present economic problems? The first priority, above all others, is the priority to invest and to expand. We must judge the Government on this basis, and almost solely on this basis.
If the methods which are followed to produce these results are unpleasant and unpalatable, we must be prepared to accept them however unacceptable they may be. We should not accept the attitude that we can go along to the I.M.F. and obtain doles to keep us going at a miserable level of economic performance which prevents a real break-through and which could have the most harmful results to our country's economy.

Sir C. Osborne: Is the hon. Member suggesting to his right hon. Friend that the I.M.F. would do us a great disservice if it were to refuse any more loans and make us work out our own salvation?

Mr. Sheldon: I am not saying that. I am saying that if the repayments of debt become impossible, we should not have just sufficient to pay back the I.M.F. and keep on with measures of austerity and a low-growth economy, but should ask the I.M.F. for something much bigger than it has accepted in the past. If that is not acceptable to the I.M.F., I have suggested other measures which might be taken.

Sir C. Osborne: Oh.

Mr. Sheldon: It is a pity if the hon. Member is surprised. This is the serious situation which we face. It is not sufficient to ask for short-term loans which we know we must repay and, in order to repay them, run our economy at a lower rate than necessary. A low rate of economy means inadequate investment and expansion, and in investment lies our real salvation as a trading country in the world. That is the way we should proceed.
I understand that the Budget and the Finance Bill have been introduced to take account of possible changes which are likely to take place internationally over the next few months. It may be that some means is required to deal with the changing situation arising from the circumstances in Germany and France.
As I see it, the Budget decision is a delaying one whereby one takes a step along a tight-rope—because the balance is a very fine one—and at the same time waits for whatever may happen, whether it be a realignment of currencies or an increase in liquidity, in terms of the international monetary situation.
I have always felt that the realignment of currencies was the most important consideration in international money matters. It is far more important than increases in liquidity, which to a certain extent are not much more than a confidence trick in that one merely increases the amount of money available rather than concentrates on the differences between countries. I say "to a certain extent" because I realise that certain


plans allow for a considerable amount of money going to under-developed parts of the world. If this were seriously a proposition, I should be more than delighted to see it happen. It is because I think it is unlikely that I say that increases in liquidity are less important than other commentators consider them to be.
What is important is the necessary realignment of currencies. What worries me most is not the German revaluation or the French devaluation but that the revaluation of the Deutschemark will not be enough. Germany has been able to continue to increase her exports at an enormous rate. Most of the developed countries in the Western world are increasing their exports to an extent which even in what we consider to be a good year makes ours look a very sorry performance—

Sir C. Osborne: Why?

Mr. Sheldon: When we congratulate ourselves on our export performance, we must understand that ours has been one of the worst in the Western world—

Sir C. Osborne: Why?

Mr. Sheldon: This is a measure of the difficulties facing Britain today. What worries me is not the Deutschemark revaluation but that it will not be enough. I am sure that Germany could accept 10 per cent. but, bearing in mind the Customs duties which are at present organised to give her a 4 per cent. revaluation, this would be an effective revaluation of 6 per cent. That is totally inadequate. The strength of the German economic competitive machine is such that a revaluation of 20 per cent. would not be out of line. What is so dangerous is that this is quite unrealistic in the context of German thinking today. We shall not get the kind of revaluation that is necessary, and so the problem in the Western world will remain.

Sir C. Osborne: Instead of worrying about the Germans, surely the hon. Gentleman should be considering what is wrong in our country. Of course they are doing better. Why are they doing better? Why is their currency stronger? It is no good trying to legislate for that. The hon. Gentleman should be thinking about our problems.

Mr. Sheldon: The hon. Member for Louth (Sir C. Osborne) has not got the burden of my argument. The whole point is that what we do is done in the context of what is happening in the Western countries. I should have thought that, with his hon. Gentleman's knowledge of international finance, the hon. Gentleman would understand that the exchange rates which are operating are a great barrier to our exports, and the advantages that Germany has are obvious.
What we may see is a possible competitive devaluation, which I do not regard as a realistic possibility; a competitive deflation, which is much more serious and in which we are not likely to be able to ask for some sort of capital inflow; or some method like the imposition of import quotas where we can take direct action ourselves.
The first matter that we need to consider is whether we should put growth as the major unquestionable priority. Certainly I think we should. This Finance Bill makes no great contribution in that direction—[Interruption.] I hope that hon. Members opposite will put forward serious arguments as to why it does not and not make trivial points about small increases in taxation here and there.
The strategy is all important, and it is the strategy which Conservative Governments in the past have got wrong. Unfortunately, Labour Governments also have got it wrong—

Sir A. V. Harvey: The hon. Gentleman complains about the value of the German mark. Perhaps he will cast his mind back to 18 months ago when his Government devalued the £ and promised great things as a result. Britain was the last Power in the Western world to devalue. Would he care to give us his opinion about that?

Mr. Sheldon: It is apparent that the hon. Gentleman still has not got my point. I am arguing in the context of the economies of the Western world and saying that we need to study them in this connection. To make petty party points at a time when we are really concerned with economic survival is a failure to understand the real problems facing Britain today.
At this stage of the Finance Bill, I find it difficult to criticise in any detail the tactics of it when there is so much with which I disagree about the strategy. That it is deflationary is obvious, but it is not deflationary merely to the extent of the £243 million referred to by the Chancellor. When one considers this year's Budget and compares it with previous Budgets, it is deflationary to the extent of £500 million a year. In other words, it is deflationary to a greater extent than is currently recognised because of the November measure, which in itself introduced a further measure of deflation that has been incorporated in this Finance Bill.
As a result of the deflation, we shall see a loss of production, a loss of investment, and, most important in an industrial context, a loss of the new techniques of manufacture which we need to understand and mobilise in the interests of the country. It is a loss that we shall never restore. We all know the argument that once one loses the machinery which should have been installed one loses not only the productive potential of the machines but also the skills arising from them.
Walking on the tightrope, as the Chancellor intends over the next few months, what is the outcome if consumption runs ahead of what he has planned? We know that he has drawn a very fine line, for reasons which we must congratulate him. He does not wish to deflate more than necessary, yet he knows that there are tremendous uncertainties ahead. He has had to decide how the level of consumption is to be permitted to increase. What will he do if consumption rises more rapidly than he has expected? What remedy will he introduce? Shall we have another rotation of the purchase tax regulator wheel? Shall we have further cuts of one kind or another?
By now, all Chancellors have learned that consumption in this country cannot be cut—

Sir C. Osborne: Why not?

Mr. Sheldon: I will tell the hon. Member for Louth why. There is a level of expectation in the country which compares the situation here with what is going on in other countries. While the people may not insist on the very high

increases being obtained elsewhere, we regard a steady if small regular increase as our right. That is what our people expect, and I fully support them. After all, it is what we encouraged them to expect, and it is perfectly reasonable. We cannot reduce consumption; so, if the Chancellor's estimates prove to be out of line, he will be faced with the dilemma of deciding what further action he should take. It is no use coming up with anything further in prices and incomes now. It is no use expecting much from industrial reform. None of these methods are going to produce results at this late stage. What may well come, if his estimates are wrong here, is a fundamental rethinking of the strategy which it is a pity was not undertaken a long time ago.

Several Hon. Members: rose—

Mr. Speaker: Order. I remind the House that many right hon. and hon. Members wish to speak. Reasonably brief speeches will help.

6.20 p.m.

Mr. J. Grimond: It is appropriate on Second Reading of the Finance Bill to ask what the Chancellor's aim either is or should be. We have been told by the hon. Member for Ashton-under-Lyne (Mr. Sheldon) that his aim should be expansion. If that is his desire, then the Chancellor must be a disappointment to him. I doubt whether that is the Chancellor's aim. His aim in the Budget is to deal to some extent with the balance of payments.
The hon. Member for Ashton-under-Lyne also said that he would not be against further massive borrowings. What he did not seem to stress sufficiently was that we have already undertaken extremely massive borrowings. I do not know how much we owe, but it must be about £3,000 million, much of it guaranteed in gold or at least not payable in further devalued currency. That presents us with a considerable problem and the Chancellor's Budget will not make much contribution to that problem. That is not entirely the Chancellor's fault. It is extremely difficult for a Government which have lost the confidence of this country and the world, at the rate which this Government have, to deal with this problem.
In the last few days we have seen another example of their extraordinary mismanagement. The performance of the right hon. Member for Coventry, East (Mr. Crossman) has already been mentioned in the debate. It was a most extraordinary affair. He must have given up reading the newspapers. He told us that he was unaware that local elections were about to take place. I understand that he was once in charge of psychological warfare. Against whom he is conducting psychological warfare may be a little obscure. It is difficult to believe that he has inspired a great confidence in our general management by making a statement which he had not realised was to be made at a time—

Mr. Speaker: Order. With respect, we are discussing the Finance Bill, not the statement made by the right hon. Member for Coventry, East (Mr. Crossman).

Mr. Grimond: The Finance Bill cannot be entirely dissociated from the general management of the Government. However, I will pass to another matter.
Last year we were told that devaluation would result in being in balance in that year and having a surplus this year, and that, after two years' hard slog, all would be well. All these forecasts have proved to be wildly wrong.
As the hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin) has said, the effect of a confusion of taxation is profoundly depressing to all who are attempting to run British industry or export. The hon. Gentleman mentioned, quite rightly, that year by year people who are conducting their businesses to the best of their ability and are not aware that they are doing anything wrong suddenly find themselves clobbered out of the blue for no reason. The hon. Gentleman had suggested—and I agree with him, because I have suggested these things myself—that it is high time that this House reformed its own procedures and set up a Committee to investigate our financial management. This was suggested both by my right hon. Friend the Member for Devon, North (Mr. Thorpe) and by the right hon. and learned Member for Wirral (Mr. Selwyn Lloyd). While I am in favour of Select Comittees, I believe that they should be closely geared into the process of government. We are not a research organisation. I agree with the hon.

Member for Wanstead and Woodford that they should be investigating either draft legislation or matters which may become the subject of draft legislation.
I do not think it is out of order to mention that the Government have produced a Green Paper on public expenditure which seems to forecast that it will be possible for the House to consider priorities in public expenditure, to examine possible alternatives and to set such alternatives against taxation and the national revenue. I think that this would be a valuable step forward and I hope that the Government will proceed with these suggestions.
This brings me to the Government's expenditure, which is at the root of our debate today. The Finance Bill is largely concerned, though not entirely, with regulating the economy and making it possible for a large amount of public expenditure to be carried on without causing acute inflation. It has to make room for large public expenditure by ensuring that the private sector does not create too much demand. Therefore, it is absolutely vital that the Government should control the public sector not only in the sense of limiting the amount of expenditure but in ensuring that they get their priorities right and get value for their money.
That is not the case now. I hope that these new procedures may improve it.
It is important to look at the Bill as mainly an exercise in attempting to keep the economy on a fairly even keel and making room for public expenditure. There are constant arguments—I have heard them ever since I have been in the House of Commons—whether Governments are right in taking £100 million, £150 million or £200 million out of the economy. I have never understood these arguments as having any great relevance, because the estimates are always out by as much as three figures. So whether they take out £50 million this way or £50 million that way seems unimportant. But there is no doubt that if the Budget goes in the wrong direction, we can expect either further inflation or unjustified deflation.
I do not entirely agree with the hon. Member for Ashton-under-Lyne that it is impossible to reduce demand and that consumption is rising. In certain sectors consumption is falling, and I am doubtful


whether consumption will rise in the near future. In certain trades—for example, the motor trade—home consumption is not rising at all. But I agree with the hon. Member for Ashton-under-Lyne that in the long term we are breeding an inflationary outlook. People are expecting it. This is an extremely serious situation for a debtor country largely dependent on exports.
The Chancellor must be given credit for attempting to bring in savings as a means of reducing demand. We on this bench would criticise his contractual savings scheme as being too narrow. The term "save-as-you-earn" was, I think, invented by my hon. Friend the Member for Colne Valley (Mr. Richard Wainwright). We are pleased to see that the Government are beginning to think in this direction, because savings, although not the complete answer, are certainly a help in combating this inflationary outlook.
Despite the Chancellor's greater reliance upon the monetary weapon—and I agree that it always seemed absurd to flood the economy with credit and money and try to mop it up through taxation—he has increased certain taxes. I want to deal with two of them. If I deal with them partly from the point of view of the area that I know, it is not only because I am interested in it but because it illustrates the effect of taxation on ordinary people.
We could hardly find two taxes more punishing to many of the development areas than the increase in S.E.T. and the increase in petrol tax. Possibly these increases might be justified in the South of England, but it is impossible to justify them in the North of Scotland.
The Chief Secretary gave us his well-known eulogy of the selective employment tax. It is slightly mystifying as to how he thinks the country survived before the discovery of this tax, but the right hon. Gentleman said some curious things about it. First, he totally forgot its effect on the building industry and, second, he appeared to say that it did not put up costs or prices. But if he ever went for a meal in a British Railways hotel immediately after the tax came in, he would have found that an extra 1s. was put on all meals at once. With any organisation

in a monoply position in the nationalised industries this tax is passed on at once.
In my constituency we suffer not from overheating and high wages but from depopulation and a relatively high rate of unemployment. The expansion of indigenous services, so far from being considered immoral, is highly desirable. This curious view of the Government that service industries are disreputable while good old manufacturing is what we ought to have is, to me, a very strange outlook. It is reckoned that the selective employment tax at the increased rate will take £220,000 a year out of the economy of Orkney alone, which will be an intolerable handicap to a small community and will gravely inhibit expansion. That is, I believe, the same sum as has been invested by the Highlands and Islands Development Board. We have 140 gentlemen in Inverness engaged in trying to put money into various parts of the Highlands, and yet the same amount is taken out of the Orkneys by this Government in one year. In Shetland a man who employed five women and six men now employs six women and three men; and this in an area where there is considerable demand for female labour but a grave need of employment for men. One shopkeeper tells me that the increase in the tax alone will mean that half of the profit on 10 per cent. of his sales will be used simply in paying the tax.
I return to the building trade. I hope that the Government will say something on this. There seems to be some doubt whether builders will be able to reclaim selective employment tax on contracts with local authorities into which they have already entered. One builder I know reckons that he will lose nearly £3,000 if this is not so, while another will lose over £1,000. It is true that the Government provide for payment of the premium to manufacturers. We welcome that, though I very much doubt whether on general economic grounds payment of this premium is justified all over the country.
But it is a complete myth to suppose that this means an instant shift of people from service to manufacturing industries, thereby benefiting the economy. It does not work like that. As far as my own constituency and many others are concerned it is the female


labour that is wanted and we are not getting the type of change from service to manufacturing industries that the Government claim to want. All this is happening at the same time as a very heavy squeeze which hits small businesses, small farmers and those who neither have internal resources of liquidity of their own nor are able to put up their prices and expand their business and thereby absorb the ever-increasing costs they have to bear.
A very real difficulty in many development areas is that we live in an inflationary atmosphere and that costs are continually rising. Big firms find it possible to absorb these costs, but it is not possible in areas such as those I am speaking of, and there is, therefore, an overwhelming case for some variation in taxation. We accept this in principle in different areas, and we accept variations between individuals. I do not for a moment deny that in some parts of the economy there is a great deal of liquidity. One of the Government's difficulties is that whatever taxes they put on income there are people who are enabled to carry on and keep up their consumption without suffering. That may be true in a certain degree of different types of business but there are other areas and other types of business where this is not at all so.
If it is possible to vary certain forms of grant I do not see why it is impossible to vary taxation and why we cannot have lower social insurance contributions or lower license fees or some remission of either personal or company taxation. Certainly, it is the easiest and cheapest way of relieving the development areas from the blows that are now raining on them not because they have been inflated or are over-heated or suffering from an over demand for labour but because other parts of the country are. But I can say for the Chancellor in this Bill that he is trying to move in the right direction in two respects. First, he is trying to ensure that he does not add to inflation by more Government borrowing. I hope the Minister who winds up will tell us more about the intentions of the Government in relation to repayment of their debt. Certainly, Government borrowing has been a potent force of inflation, and if we are now to seek a change, and if it is to be permanent

even in an election year, in the long run this may be a good thing.
Second, the Chancellor showed signs of trying to reform the system, although I and my colleagues regret that he has not gone further. Last year he appeared to be hopeful that he would make a start on the simplification of the tax system, and we were promised a report on the selective employment tax. Instead, we have had a Green Paper and we must thank the Lord, or the Chancellor, for small mercies. He is up against formidable obstacles. He inherited an especially difficult position. He is faced with various vested and bureaucratic interests and with a tremendous strain on the Inland Revenue.
I can only hope that this debate and the general tenor of speeches in Parliament, and not only from this side of the House but from behind him, will encourage the Chancellor in trying to straighten out this cat's-cradle of taxation which is in danger of strangling some of the smaller businesses which can hardly compete, and which is doing great harm to initiative within the economy. I am not one of those who think that incentives are everything but I do believe that if the Chancellor's object is to improve the balance of payments and raise exports—and it is notorious that our exports have been sluggish—he has to try to instil into this Government as a whole a sense of purpose and better management and also, in his own sphere, give people the impression that he really believes that he can get into surplus next year or if this is not possible then, that he knows what is his aim.
I hear talk of rephasing and realignment, which has a slightly sinister ring, and as undoubtedly at some point we have to get nearer to surplus than we are now—and it is not always realised that we are still running up deficits—the Chancellor has to find ways of calling out more initiative from the people. In this country there are still a vast number of people willing to give employment and generate economic activity. They are the people to be found in the private, not the public, sector of the economy.

6.35 p.m.

Mr. Joel Barnett: One must have a great deal of sympathy with the right hon. Gentleman when he refers to the need for a simplified


tax system. I very much want to see some simplification but at the same time it would be foolish not to recognise that to get simplicity while at the same time having equality is extremely difficult. It would be simple, for example, to have one across-the-board purchase tax or sales tax without any income tax at all but it would hardly be equitable by any of our standards. On the selective employment tax the right hon. Gentleman was a little contradictory. He started by showing how it must be passed on in the field of hotels, but went on to say how small businesses in his own area have to absorb it. That proves the point my right hon. Friend was attempting to make, that S.E.T., unlike purchase tax, is not passed on to the same degree. That was all he was claiming for it in the particular context.
For me at any rate and for those on this side of the House, a Finance Bill must be examined to see how far tax changes bring nearer a more socially just and equitable society. We should be thankful that at least we have got away from any idea that a prices and incomes policy can bring us nearer to that kind of society. An hon. Friend, a junior Minister, conceded what everybody had already recognised, that no prices and incomes policy working on a basically unfair wage system could bring about a just and equitable wage structure.
What is needed is a fundamental change, and with the best will in the world the trouble with the Bill is that it does not do that; instead it attempts, in a piecemeal fashion, to deal with a number of tax avoidance measures, which are, of course, worth dealing with in themselves. By looking at two examples, which is what I propose to do, of the attempt to reform the tax system in this piecemeal way, by attempting to cut out particular abuses of patent avoidance, one sees even more clearly how much we need to make fundamental changes in the whole tax system.
I propose to consider first the question of loan interest. Anyone who knows anything about this is aware that there has been a terrible amount of abuse in the use of loan interest. There are, for instance, the "borrow-all" type policies, the borrowing of money by wealthy tax-payers to buy shares and other assets,

and, indeed, other methods, which will not be excluded by the Bill. I believe that it was right to try to deal with this piece of tax avoidance especially at the higher level.
My right hon. Friend the Chief Secretary said, and quite rightly, that we had an irrational system of loan interest in the way that interest was allowed and not allowed for tax purposes. I said much the same thing when we debated mortgage interest rates recently, but where I totally disagree with my right hon. Friend is when he says that under the Clause we are moving to a more rational system. My right hon. Friend said that we did not have a logical system before, but on looking at the Clause I say that we are moving from one illogical method of taxing or not taxing interest to one that can be seen to be even more illogical and irrational.
I should like to put one or two points to my hon. and learned Friend, and perhaps he will correct me if I am wrong, because I think that it is important to consider the way in which loan interest is dealt with in the Bill because it has some bearing about what has been said about the need for a Select Committee to consider various matters.
As I understand it, it will be all right to borrow to invest in land, but it will not be all right to borrow to invest in land companies. This seems to me to be the crazy way of going about things. Equally, by paying a smaller amount of money one can buy a practice or a company which has an overdraft and the interest on that will be an allowable charge, but if one does not take over the overdraft and one pays a much higher figure for the company, the interest on that will not be allowable.
What will be the position if a company buys a subsidiary company? Presumably that will be allowed. But if it is bought as an associated company, that will not be allowed. If a person expands his own business, that is allowed, but if he buys another it is not. If someone borrows from his own business by creating an overdraft and putting his capital account into debit, presumably that will be allowed.
One of the more difficult anomalies is that of a young practitioner, a solicitor, an accountant, or whoever he may be,


who say, last year borrowed money to buy part of a practice and is now stuck with a loan for perhaps 20 years, the interest on which is not allowable. It is not like buying shares in a company, because those shares can be sold. The young practitioner to whom I have referred cannot sell part of the practice for it is his living.
I mention those factors in brief because they are Committee points, but I suggest that before we discuss them my right hon. Friend should produce a White Paper setting out his real intentions with regard to loan interest. I am sure that my right hon. Friend should not have it in mind to deal with this matter in the way in which he seems to intend to deal with it under the Bill as it stands.
I appreciate the difficulties once we start having exemptions, particularly when they are exemptions which affect the whole of trade and the purchase of land, whether for owner-occupation or for any other reason, but if the cost of preventing abuses—which I believe could, and should have been prevented—is so heavy in terms of new complicated laws which create new anomalies, I think that it would be better not to bother at all. Incidentally, it is interesting to note that comparative smallness of the abuse at the higher end of the scale. The Chief Secretary said that only £5 million would come from surtax payers. If my right hon. Friend agrees to publish the White Paper which I have suggested, we may be able to find a way of dealing with larger abuses, if necessary leaving some of the loopholes, which will inevitably exist anyway while we have our present tax system.
I come now to the Clause which is said to deal with pop stars. The Chancellor is right in his purpose. A man who earns £10,000 a month, even if it comes down to the "trifling" sum of £15,000 a year—and generally speaking it comes to rather more than that through the judicious use of the present tax system—is in a quite different position from the many people who have net incomes of £10 or less a week. The differential between the two is far too wide. A tax system which allows him on top of that to capitalise is clearly unfair, and I want something to be done about it.
It is interesting to note that the Opposition Front Bench has not criticised the

Chancellor's purpose in this respect, but the hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin) used a phrase which I repudiate. He said that we pursue equity to an unacceptable degree. From the figures which I have quoted, I do not accept that in terms of real net incomes we are pursuing equity to an unacceptable degree. So I accept the Chancellor's purpose as set out in this Clause, but it seems to me, and apparently it does to the Sunday Times, too, that the Clause as drafted will catch, for example, the sale of good will. I had better declare an interest, because I have a reasonable sized piece of goodwill which I may want to sell some day. It may also catch the sale of a service company. It may be that we should try to tax that kind of thing. It may be that this is the sort of change that we want to make in the tax structure, but it is impossible to make that change without altering the whole national financial structure, and I assume that that is not what my right hon. Friend has in mind in this Bill. Certainly my right hon. Friend's intended purpose of preventing the capitalisation of earnings could not be regarded as an intention to change the whole financial and institutional structure of this country. That is worth considering, but it cannot be done by one Clause in a Finance Bill.
I think that my right hon. Friend is right to try to stop the abuse which perpetuates and adds to the differential in real net incomes, but if this means introducing more complicated tax laws and anomalies, it would be better not to bother unless, as with the question of loan interest, my right hon. Friend is prepared to accept Amendments which will remove the more obvious anomalies.
I have referred to only two major changes. I do not propose to refer to any more, because I believe that the two Clauses to which I have referred show how far we are from a socially just tax system. It puts in a clear perspective how tinkering with the system will not solve the problem of net differentials of income, which are still far too wide.
We on this side must reconsider our aims in taxation. In the case of capital, for example, we allow inherited wealth to a degree which creates a built-in denial of the oft repeated claim that all men are born equal. Under our tax system


all men are not born equal. This is surely not something which we could support, so we want a tax system geared to dealing with inherited wealth. This is much more fundamental than dealing with the relatively minor matters, important though they are, of tax avoidance.
In the case of income, we talk a good deal about freedom. What sort of freedom allows a tax system and a social structure which results in one man earning as little as £15 a week while another can earn £15,000 a year? It is accepted that we cannot do it through a prices and incomes policy, so we can only achieve an adjustment of differentials through a change in the tax structure. If playing about with small measures distracts us from our major aim, we are in danger of getting the problem out of perspective. We obviously cannot stop considering small aspects of the problem. We cannot ignore the abuses, but we should not lose sight of the fundamental changes, which is the really urgent need.

6.52 p.m.

Mr. Nigel Birch: I hope that the hon. Member for Heywood and Royton (Mr. Barnett) will forgive me if I do not follow him into what he admitted were Committee points. His Committee points showed a very sound capitalist outlook, and he thought that he would put the matter in balance by a good old anti-capitalist peroration.
Were I in possession of the Bill, I could give the number of the Clause with which I want to deal first. It is that which deals with the abolition of capital gains tax on Government and government guaranteed securities—I want to lead on from that to some consideration of Government credit in general. I have some background in this matter. When the present Home Secretary imposed capital gains tax on gilt-edged securities there was a great outcry, in which I took some part. The main argument against that action was that it was fraudulent because many gilt-edged stocks had been sold at prices at which they would not possibly have been sold unless it was confidently expected that the amount of appreciation was not to be taxed.
We have made rather a good agitation about this. I moved an Amendment in

1965 at that Box to exempt gilt-edged securities and local government securities from capital gains tax. Kaldor, of course, devised all these things originally and, as always, our present Home Secretary was completely under the influence of No. 2 in the Hungarian Mafia, who was sitting in that box at the time. The solution was ludicrous—that some gilt-edged securities should be wholly exempt, some should be wholly subject to capital gains tax, and some should be partially exempt and partially subject.
That did not even meet the moral case, because the nominal price at issue of a Government security has little relevance to the price at which Government securities are actually sold. Masses of stock had been sold at under issue prices and would not have been but for this expectation. The Government, having refused many times to do this, have now come around and exempted Government securities. The injustice is, to some extent, righted, but it again produces a situation, as was produced before, of sudden changes which had been unforeseen. There is a casino atmosphere in a market which should not have that atmosphere. The chaos caused by the Kaldor proposals was such that the market had to be suspended for several hours and many changes between one security and another resulted.
One must not look a gift horse in the mouth, I suppose, even if one suspects that one will find something nasty inside it. This is something which will help the market, but I do not believe that either the question of equity or that of helping the market was the Chancellor's real motive. The Chancellor likes his little deceptions. The House will remember that the first statement which he made, on the Letter of Intent, was entirely at variance with the Letter of Intent which he published the very next day. He succeeded in deceiving the House, the Press and the public for about 18 hours about his tax on blankets, sheets, knitting wool and towels, not to mention things—which are hardly mentionable because they are so horrible—like pensions and teeth and spectacles.
He did not mention his real motive. In some of these Budget documents we heard that this abolition of tax will cost £7 million. In fact, of course, it will save the Government a very large sum.


They will collect far more tax, because the unfortunate holders of gilt-edged securities have astronomical losses and capital gains tax is a tax on gains less losses, so it was possible for people to realise their losses and put them against their gains. Therefore, the net loss for the Government has been very large, but their motive is not to relieve anyone but to collect more tax.
I wish to turn to the effect on the municipal borrowing. This would help any local authority which can squeeze some money out of the Public Works Loan Board, and it will be of some small help there, but if they cannot do that, or can only get a relatively small proportion from the Board, it will greatly penalise such authorities, because it will make the attractions of local government securities relative to Government securities very much less and increase the difference in yield between the two.
What we have had from the Government is what the Financial Secretary said the other day, "It is all right. All they have to do is borrow abroad." Let us consider this for a moment. The only place where any weight of money can be borrowed is Germany, and we are urging the Germans to revalue their currency. The hon. Member for Ashton-under-Lyne (Mr. Sheldon) wanted them to revalue by 20 per cent., but certainly an upward valuation against sterling, however arrived at, of 10 per cent. is not improbable and is much desired by the Government. But what happens to the unfortunate local authority which borrows for ten years and must repay at 110 per cent. and gets its interest charges "jacked up" by 10 per cent.? It seems to me to be an act of desperation.
One other thing which the Government have done which affects the gilt-edged market is the "save-as-you-earn" scheme. It will do something, but not very much, and it will only do anything if it attracts savings which otherwise would not have been made, and not in gilt-edged securities. Switching from the existing National Savings securities into the new stock would only cost the Treasury money and would make no difference to the economic position.
I do not think that workers have shown much desire to have their wages

attached, which is how I understand the scheme will work. It is very doubtful whether this is attractive compared with endowment assurance, and it is, of course, expensive. The Chancellor informed us that for someone paying the standard rate of income tax the grossed-up yield is equivalent of 12 per cent. What will it be for a surtax-payer paying tax at the maximum rate? Quickness of apprehension will give the answer as 86·4 per cent., which shows how utterly ludicrous are high rates of tax.
I cannot imagine why the Government do not see how damaging this is to themselves. They are bound these days to pay the rate for the job to top people in the nationalised industries. When there are enormous increases in salary—they are really only nominal because, after tax, they do not amount to much—people become annoyed. If the Government adopted a more rational tax system they would not constantly be coming up against this sort of irrational problem.
In considering the general effects of the Government's action, the first point to note is that the gilt-edged market has been slaughtered and the results of this are considerable. Hon. Gentlemen opposite must sometimes wonder why all the things that they have done have had so little effect in getting our balance of payments right. Indeed, the effect has been less than nil.
When Lord Thorneycroft was Chancellor of the Exchequer and there was a run on the £ the crisis lasted for a matter of weeks. A similar crisis occurred when my right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd) was Chancellor and when there was a run on the £, but that, too, lasted for only a matter of weeks. Indeed, when it was over he was able to prop up the dollar.
Our present crisis has been going on for four-and-a-half years, and it is now worse than it has even been despite devaluation. Why do we have this state of affairs? The question of money supply has a great deal to do with it. It used to be unfashionable to talk about money supply, and many of our bright financial journalists, having made a few snide remarks about Lord Thorneycroft, did not refer to the matter. But we are now turning back to it, as we are bound


to do because the brokers' men insist on our doing so.
The enormous increase in the quantity of money stems from three factors. The first is that in most years under Labour there have been very large uncovered deficits resulting from a large borrowing requirement. That has been reversed in this Budget, but only because of massive increases in taxation; and this in present circumstances is inflationary and ultimately self-defeating. The second reason why money supply has gone up so much is, as the Chancellor has at last admitted, because we have been running balance of payments deficits consistently. We are still doing so. The third and perhaps most important reason is that on balance the Government have for years been unable to make net sales of their securities. Indeed, they have been large net buyers, and that is still going on.
In the last quarter of last year the amount of Government securities bought by the Government amounted to £400 million, and I suspect that this year they have been buying more. There are two reasons why the market has collapsed. The first is on the supply side and the second is on the demand side. On the supply side, the amount of industry nationalised is an important factor, because if one is to finance capital expenditure by the nationalised industries without inflation one must get people to buy a sufficient quantity of Government securities to cover that capital expenditure. If that is not done the money must be raised by taxation, by borrowing abroad or by inflation. The Labour Government have done all three.
A classic example of what can happen occurred when steel was nationalised. Compensation totalled about £700 million. The Government knew that they could not sell £700 million worth of long-dated Government securities, so they issued short-term ones; three-year securities. However, they could not even sell those, and I believe that when the history books are written we shall find that about three-quarters of that sum, if not more, was sold back to the Bank of England soon after it was issued.
This means, in effect, that the Government printed money and issued £700 million of it to the holders of steel shares. That money is still knocking around the

economy. No wonder 1967 was a disastrous year, with an enormous balance of payments deficit and a vast increase in the supply of money. I have not yet heard a Government spokesman answer this question about the burden that nationalisation places on the country, remembering that in present circumstances we must finance all the capital expenditure of these industries out of taxation and that this in itself is inflationary.
On the demand side, the trouble is simply that people have been so badly done down. This fact is often ignored by the financial journalists. They assume that others are sillier than they are, but evidence is not convincing about that. One need only consider what has been happening in recent years. Hon. Members may recall the Radcliffe Report on monetary policy, about which I made an eloquent speech when it was debated in 1958. I described the Report as darkening counsel and said that it was muddleheaded and confused and that it has lowered our status in the eyes of the world.
However, a bland statement in that document said, in effect—the figures are long out of date—that if one got inflation at 2 per cent. per annum one wanted 5 per cent. for one's gilt-edged securities rather than 3 per cent. I pointed out that in terms of 2 per cent. compound inflation one would need, for a 25-year loan, to redeem it at a premium of 64 per cent. to get one's money back in terms of real purchasing power. Those figures are now ludicrous and it would be too terrible to calculate what one would have to have one's bonds redeemed at with inflation running at 7 per cent. Because people have taken such terrible punishment they are not buying, and it will take a lot to get them to buy.
What will happen next? I prophesied last year that there would be an increase in exports. I prophesy that there will be another increase in the coming year. I do not think that we have quite run out of the price advantage of devaluation, although the Americans will no doubt get their inflation under control and if they do, our difficulties will be much increased.
On the other side, it looks as if the prior deposit scheme has made no difference. We must thank goodness that it has not. If it had, our propensity to import would have been more horrifying


than it is. Oddly enough, the prior deposit scheme may produce some effect just before it is taken off with people saying, "We can afford to wait until it is removed." There might, therefore, be some good trade figures in the middle of the year, but they will not be nearly enough to cope with the enormous debt that we have.
I have no doubt that when that better trend is shown the trumpeters of the Horse Guards will be summoned to Downing Street, the door will be opened and the Prime Minister will appear wearing his Anguilla Star. He will be applauded by his colleagues who, surrounding him, will praise him as he announces the final miracle to end all miracles.
We cannot ignore the fact that the situation remains desperate. Our debts are astronomical. We have done that profoundly immoral thing of borrowing money that we know we cannot repay on the due date. It is a sign of the moral state of the country that articles often appear in the newspapers saying that this is our strength; that we have borrowed so much money that people must prop us up. Hon. Members may recall that it was Giolitti who said of the Sultan of Turkey of his day that he was armed with his debts. That was, up to a point, true. We are not trained in this country to play that sort of hand. I think the Chancellor's vices and abilities are on a far smaller scale than those of Abdul the Damned. I do not think we are going to play that hand very well. All the important things done in this Budget put up costs and prices and increased the hopeless steady continuation of inflation. It was Lenin who said:
If you want to destroy a country first debauch its currency.
People are reaping where they have not sown and they are not reaping where they have sown. I believe that this can be put right, but we have to have the will and the determination.
When Peter Thorneycroft was Chancellor he said that if wages raced ahead of productivity he would refuse to finance them. This basically is what they have done in Germany, and it has not resulted in unemployment but in the most rapid increase in wellbeing ever known. It is always a question of having the will.
My peroration is always the same; we can get rid of our troubles which are really at the margin, but hon. Members opposite, particularly this Chancellor, are not going to do it. When the Chancellor was in Bonn for the monetary conference he got very angry with the Germans and started abusing them. It is not a sensible thing to do to abuse the man who pays for your shirt and trousers. The Germans were annoyed and described him as "an incompetent miner". I am sure they did not mean offence to the great mining profession. We can at any rate say in defence of our Chancellor that he is within a tenth of a gnat's eyebrow as refined as Aubrey Jones and, even more incontrovertible, he is the best Chancellor of the Exchequer we have had since the present Home Secretary; but it is not enough.

7.12 p.m.

Mr. Norman Haseldine: The right hon. Member for Flint, West (Mr. Birch) will not expect me to follow him.
Of the six Parts of the Finance Bill comprising 53 Clauses, I find myself in support of five Parts and 51 Clauses. I am sure that my hon. Friends on the Front Bench will not expect that I shall be able to record my support of Part V, which comprises Clauses 43 and 44.
I was able within four days of the Budget announcement to receive the reactions of people in my constituency. I my say in all honesty that I found a generally good reaction to the Budget and that many of the measures announced were acceptable. Measures to allow further increases in allowances to single persons, measures for a contractual savings scheme and measures to stop further tax avoidance, to charge interest on tax arrears—these are broadly accepted. The measure which I found most criticised was not a question of direct tax or tax on individuals, but the one to increase S.E.T. by 28 per cent.
The Chancellor is deluding himself it he believes that this tax is not the concern of the man in the street or the woman in the High Street. However much he may believe that distributors, retailers and the service trades generally get red hot about this tax, my right hon. Friend must not discount the widespread concern about this form of tax. Three times


now it has featured in Finance Bills. The effect on the cost of living is well understood and feared. The many simple calculations he has made that it would result in only a small percentage of rising costs have consistently shown him to be wrong. Prices have risen very much more than the calculations showed.
In his Budget Statement the Chancellor said:
The second …"—
the alternative to S.E.T.—
would be to have gone for a further rise in traditional forms of indirect taxation, or for a further broadening of the Purchase Tax base, which would almost certainly have meant a wide incursion into the food field.
Does the Chancellor believe that he has not made a wide incursion into the food field? Does he realise how far he has made an incursion into the field of essential and necessary foods, hitting hardest those who can least afford it? If the Chancellor had not come for a second time on this horse following the original imposition by his predecessor, he would not have had the misfortune to have listened yet again to many of my hon. Friends and me pointing out the absolute error of his ways. He must surely realise that he has incurred widespread anger on this account.
Should my right hon. Friend be thinking at this moment that yet once again he is having to endure one of those Labour-Co-operative Members, let me tell him that this is no special pleading. Over 80 per cent. of the retail traders of the country, in the retail consortium, have expressed themselves in their recent joint statement. I shall not take the time of the House by reading it, for it is well known. In his Budget Statement my right hon. Friend also said:
That the effect of this increase upon the retail price index will be about one-third of that of raising an equivalent amount of revenue from Purchase Tax or the other excise duties."—[OFFICIAL REPORT, 15th April, 1969; Vol. 781, c. 1028–9.]
Almost every authority in the retail distributive sector disagrees with this estimate.
The retail consortium estimated that the full effect of the Budget would be that prices charged by efficient retailers would be increased by 2½ per cent. That is five times the Chancellor's estimate.
[Interruption.] May I ask the hon. Member for Worcestershire, South (Sir G. Nabarro) to cease speaking so loudly, as I am quite disrupted in my endeavours to make my speech?

Mr. Speaker: Order. Hon. Members should listen to each other.

Mr. Haseldine: The National Grocers Federation made a statement recently which follows very closely that of the retail consortium, but its estimate is that prices could rise as much as 4 per cent. The grocers' estimate is that the measures will put up the grocery bill by at least 2 per cent. This is in the whole market of £3,000 million a year, which means that housewives must pay out in the coming year through S.E.T. not less than £60 million to get the same sort of goods and services as they are getting now.
It is interesting to note that the Food Manufacturers Federation has said:
We have repeatedly pointed to the fact that Government actions have militated against the food industry's attempts to keep prices stable. The surprising increase in S.E.T. will inevitably be reflected in prices at the point where they matter most—in the retail outlets.
A further aspect is that under Clause 44(5) persons engaged in the distribution of milk to consumers are excluded from refund of S.E.T. This is wrong. It is another example which strengthens my case that S.E.T. is a tax on essential foodstuffs. Milk seems to have been singled out for this treatment, and it is impossible to understand why.
The Co-operative movement is not alone in objecting to this. The Milk Distributive Council, which represents the whole of milk distributive trade, both large and small, has asked for the Clause to be withdrawn. This is of tremendous importance as regards the service aspect. If it is not possible to recover the extra distribution charge in milk prices, door-to-door deliveries will obviously have to be stopped. One appreciates that this can bring great hardship to old and immobile people, who rely on them. Not all households in this country are yet equipped with refrigerators. One wonders whether the distribution of milk not only to homes but to schools and hospitals is the sort of service which the Chancellor has in mind when he talks about services in his Budget. He must know that some services since 1966 have made a separate charge


on bills for S.E.T. This cannot be done in the case of milk. S.E.T. has been allowed in calculating the margins on milk distribution, but what now happens in the case of the additional 28 per cent. S.E.T. charge? It will inevitably increase the pressure for a rise in milk prices.
I turn to another aspect of the Chancellor's decision to increase S.E.T. In the Standing Committee on last year's Finance Bill my hon. Friend the Member for Willesden, West (Mr. Pavitt) and other hon. Members closely questioned the Chancellor on the Reddaway inquiry. He said:
My reply to that is that it was not possible for me, in the circumstances with which I was confronted this year, to say that I would not deal with the problems confronting me in the way I thought they ought to be dealt with because I had to wait and hear what Mr. Reddaway had to say."—[OFFICIAL REPORT, Standing Committee A, 11th June, 1968; c. 1887.]
How does that match up with his statement ten months later, in this year's Budget speech, when we appear to be no nearer receiving the Reddaway Report? He said:
I must not anticipate Professor Reddaway, …"-[OFFICIAL REPORT, 15th April, 1969; Vol. 781, c. 1029.]
That makes one feel that this was a red herring.
Many of my hon. Friends believe that we should have anticipated the Report from Professor Reddaway before the Budget Statement, because we hang on the words of my right hon. Friend on 19th March, 1968:
… the increase I have announced will not prevent for the future any desirable re-casting of the tax in the light of Mr. Reddaway's report and any other available evidence."—[OFFICIAL REPORT, 19th March, 1968; Vol. 761, c. 286.]
I wonder whether my right hon. Friend accepts the advice he received from the "Little Neddies", and the Report issued yesterday by the Economic Development Committee for the Distributive Trades. Ones must take note of the statement in Appendix 4 of the Report, which says:
All legislation which is based on the principle of selectivity produces anomalies at the fringe. It does however seem that the distortions arising from the current form of S.E.T. are particularly serious.
I must say without further qualifications that the expediency of raising considerable revenue on the basis that it is easy to collect is one of the most dan-

gerous and unjust methods that I have encountered. I remind my right hon. Friend of his Budget Statement in March, 1968, when he said of S.E.T.:
It is the only means we have of taxing services"—
I wish that he would not use that word when he means retail distribution, and particularly foodstuffs—
Which are increasingly used in a relatively prosperous society, particularly by the better-off …".—[OFFICIAL REPORT, 19th March, 1968; Vol. 761, c. 284.]
I emphasise his last words. Is he now suggesting that foodstuffs are within the category of social discrimination? Recent surveys have made it abundantly clear that despite social differences, fortunately, the pattern of our spending on essential foods varies very little. I hope that my right hon. Friend realises that he is on very dangerous ground, especially when a year later he makes such a steep increase in S.E.T., which will hit the elderly and lower-paid people most of all.
My hon. Friends and I will seek to make Amendments to the Bill to try to offset the effects of this increase on foodstuffs and milk distribution. We appreciate that the Chancellor has had a very difficult task, but we do not accept that the difficulties forced him to take such action, which increases the cost of foodstuffs to such an extent as it undoubtedy will. He should know that the Co-operative Party has undertaken a long study recently on "Taxation and the Consumer." We hope that we may be able to acquaint him more fully with the results, but in view of the length of time for which I have already spoken I propose at this juncture merely to say to the Chancellor, through my hon. Friend the Financial Secretary, that we do not want to make our complaints without suggesting some alternatives, and it will be appropriate when we present our Amendments to proceed on those lines.

7.27 p.m.

Sir Arthur Vere Harvey: I agree with most of what the hon. Member for Bradford, West (Mr. Haseldine) said about the increased cost of living, to which I will refer later in my speech.
The Budget took a lot of people in on the day the Chancellor of the Exchequer made his Budget Statement. I can well understand why people did not notice until the following day the Schedule


tucked away which put a 13 per cent. tax on all textiles. The Chancellor did not refer to that in his speech, nor when he went on television that evening. It was wrong for the Chancellor, who has the privilege of broadcasting to the British public on both channels, to omit any reference to an increase in textile prices through purchase tax. Surely he must have been advised by his Department that if he did not refer to it in his long speech at the Dispatch Box he should have done so in his speech to the electorate. But there was not a word. It was deceitful and very naive of him to omit any reference to that. The Chancellor made it appear that the effect of the new proposals would be minimal on insignificant trifles of household expenditure, and that is why people were taken in. They are only now beginning to realise the full impact of the Budget.
I want now to refer to what could be termed a Committee point, because it cannot be made too often. The increased pensions for old-age pensioners were mentioned in the Budget, quite wrongly. The whole House was delighted that they are to receive an increase in the autumn but nothing was said then about how the increased pensions will be paid for, and we still have not heard. The House has a right to know, and the Chancellor should not have announced the increase like that. We know that he did it because he was currying favour with some of his Left-wing Friends and making a good impression at the time. This has a considerable bearing on the country's finances. Like every other hon. Member, I welcome the increases, but what the Government are giving the old-age pensioners with one hand they will take away with another.
Old-age pensioners cannot afford to replace linen. They stitch and darn and get given bits by relatives or friends. An old lady in my constituency said to me the other day, "Do you realise how much a reel of cotton has gone up in price?" I found that it had doubled in a short space of time. That is how old people measure their expenditure. They have to live. What about the many housewives and others who knit their own garments and buy their own skeins of wool and who must now pay 13 per cent. more? Many old-age pensioners

also knit. This has been a very wrong decision by the Government.
The increase in selective employment tax will bring in another £130 million, a 28 per cent. rise. As the hon. Member for Bradford, West has said, this can only increase the cost of living. The Government find it an easy way of collecting money but it is a bad tax in every form. It must have an effect on the cost or living. The cost of food will go up, thus taking a proportion of the increase which the old-age pensioners are to get. It may not be very much to begin with but every penny counts with them. I hope that we shall be told tonight how the increase in pensions is to be paid for.
When the Prime Minister made his famous broadcast at the time of devaluation he said:
Farm production will be stimulated and will be able to do more to replace imported from abroad.
If in the succeeding 18 months the Government had done the right things for agriculture, they could have gone a long way to solving our balance of payments but they have not done so. However, we have had repeated promises. The Minister of Agriculture's statement last autumn about the expansion of industry was encouraging, but while the annual price review could be attractive to certain sectors such as beef rearing, in the main it allows for only a little expansion.
How can the agriculture industry expand when the capital is not available? Not long ago a farmer could take out a mortgage with the Agricultural Mortgage Corporation at 6 per cent. Then it became 8¼ per cent., and now he will have to pay 10¼ per cent. That is expensive money and many farmers cannot afford to borrow at that rate. The selective employment tax also affects farmers. Admittedly, they get the money back but they have to lend it to the Government, in effect, before getting it back.
The Chief Secretary was rather boastful about the various methods in which money is collected and the amount of form filling which has to be carried out by industry. The farmers find precious little time to fill in all the forms they have to fill in in order to get back their selective employment tax, which the right hon. Gentleman says they get back


within a week. I do not get mine back within a week. It is more like four weeks or more. The least the Government can do is to speed up repayment of the S.E.T., at any rate for the small farmers.
Let us take the case of a farmer going in for a 150-acre farm who has to borrow half the money. It will cost an additional £400 a year in increased rates of interest. Where is the money to come from? It will cost that farmer on the basis of borrowing the money three or four times per acre what tenant farmers are paying.
If the Government went flat out to increase agricultural production we should be some way towards solving our balance of payments problem—and no better food is produced in the world than British food. We have a very efficient industry which could be of great help to the nation's economy. But what has happened? We have massive imports of dairy produce. I read the other day that yoghourt is being imported from France.

Mr. Speaker: Order. We can discuss the financing of agriculture but not other aspects.

Sir A. V. Harvey: I appreciate that, Mr. Speaker. I am trying to convince the Government that agriculture can play a great part in solving the balance of payments problem. We have always been told, "We cannot put duties on imports from Scandinavia, for example, because we shall not be able to sell them our manufactured goods if we do." I do not accept that argument. These countries include those with which we have adverse balances of payments, and eventually the person buying a British car will buy it for quality and delivery. If the quality of our goods is right, we shall sell them.
Why do not the Government review their policy on sales to foreign powers? There were Questions in the House yesterday about the possible deal with Greece, including a nuclear reactor. Frigates could be sold to South Africa. We know that the right hon. Member for Belper (Mr. George Brown) disagreed with the Government about that. An enormous amount could be sold to help the balance of payments if the Government were sensible instead of pandering to the Left wing over these matters.
Since the Government took office, taxation has increased by £2,640 million, and £1,513 million of that has been imposed in the last two Budgets. These are staggering figures when we are trying to encourage people to work and do more. The Government do not seem to get anywhere at all. A year or two ago I thought that the Government were perhaps accident prone and had had a lot of bad luck, but I have concluded that they are the most incompetent lot I have seen here in the last 24 years. We saw only yesterday how incompetently they run their own affairs. I do not see how they are fit to run the nation's affairs if they cannot look after their own.
Where is the economic miracle that we were told last summer was just around the corner? The Prime Minister said at the General Election:
Over the period of a Parliament I believe we can carry out our programme without any general increase in taxation.
There were scores of such statements. Hon. Members opposite may wriggle about these things, but the Prime Minister said them. His Government were in power with a majority of four and he was determined to get back at any price. He was prepared to sell himself and his party at any price. Confidence has gone not only at home but overseas as well. I was in America for two days during the week before last, and if anyone talks about exporting being fun then he should do it. He should try a two-day trip with a six-hour time change. It is a killer. Our exporters are up against a tough job. There is no fun in it.
What impressed me in the United States was that, while they still like us, they have practically written us off as an important nation, and with the contraction of trade going on there I cannot see our exports increasing. What are the Government doing to help industry to sell its goods? I have tried to show how difficult it is for these men who travel round the world and have a very tough time of it. Let us consider the scales of payment made to executives in American companies, reflected in a survey carried out over a period of three years.
In marketing, finance, production, research and development, and personnel Britain is bottom of the league. These men have to be paid. They are doing it not for the Labour Party but to better


themselves and give their families something more than they have previously had. They are not all Old Etonians. They are doing a very difficult job and are surely entitled to some reward for their extra efforts. The executive in Italy is paid double the wage of his British counterpart. This matter must be reviewed if Britain is to get better results. The Government are killing and stifling the nation in every direction, whether it is the man selling textiles in America or the worker on the factory floor doing a few more hours to earn some overtime.
Taxes are far too high and confidence has gone not only here but, sadly abroad. When the Chancellor took over in November, 1967, he started with a lot of goodwill, in spite of the damage that had been done by the present Home Secretary. What happened? Between November and the Budget there was probably the biggest spending spree that we have had in history. Motor cars were being bought, pictures, cases of gin and wine—people were buying up anything they could get their hands on and the Chancellor neglected to deal with this problem. The Government were frightened to bring in measures to curb consumption for fear of increasing the number of unemployed.
That was the damage done, and the country has never really recovered. We have been told that we have almost run out of the benefits that might be obtained from devaluation, and I agree. There is very little mileage left in devaluation. We are now faced with the problem of having to pay considerably more for our imports.
I listened to the speech of the hon. Member for Heywood and Royton (Mr. Barnett) but he did not direct his attention to the problems facing the country. It was a question of levelling everyone down to the lowest point. Yet he is an intelligent professional man. It will not do. At the end of the day the only thing that will save the country is to export more and cut down expenditure wherever possible at home. The Government should give an example here, but I despair that they will ever do so. It is no good the party opposite blaming the Prime Minister for everything that goes wrong. They are doing it, it is being done in the Press, and it has been going on for weeks. Every Minister and every

member of the party opposite carries responsibility for the state of the country, and the people will remember this in the next General Election and on Thursday.

7.45 p.m.

Mr. A. H. Macdonald: I want to refer to the speech made by the right hon. Member for Flint, West (Mr. Birch). In some ways it was so good, yet in other ways it was wanton and irresponsible. The right hon. Member knows better than most the necessity for creating real savings to finance the nationalised industries. For the sake of making a witty remark he permitted himself to refer to the "save-as-you-earn" scheme as an attachment of earnings. That was a most unfortunate reference. I saw no reason for the reference to the Mafia. It is a great pity that for the sake of a witty remark these wanton and irresponsible things were said.
The hon. Member for Macclesfield (Sir A. V. Harvey) spoke about the level of taxes. About three or four months ago the hon. Member for Lowestoft (Mr. Prior) introduced a Private Member's Bill dealing with the payment of pensions to disabled persons. There was no price tag attached to it, and I understood very well why. I was inclined to think that the principle behind the Bill was good and suggested that it should be given a Second Reading and go into Committee where a price tag could be attached. Hon. Members opposite showed great approval of these remarks. I do not delude myself. I am aware that a great part of that approval sprang from the fact that I had indicated that I would not accept the advice of my own Front Bench.
I had hoped that some of that approval was for a remark I made, saying that if we wanted to make such provisions for these people we had to face the necessity of finding the money to pay for the pensions. It will not do when hon. Members come forward with proposals of that kind yet shrink from the necessity of raising the required tax. I am proud to think that we have carried out our objectives in social security. I do not shrink at all from the fact that we have found it necessary to raise finance to pay for such things.
Every year I make the same plea in this debate. This year I am somewhat heartened to find my hon. Friend the


Member for Heywood and Royston (Mr. Barnett) expressing similar views. I very much regret the tinkering Amendments that come forward annually to plug loopholes or rectify anomalies—always for the most admirable reasons. However, the cumulative effect cannot but be unsettling.
How pleasant it would be if we could have a bumper Budget once every three or four years, clearing up the mass of anomalies and plugging loopholes and so on. From then on, if there were undesirable features, then we should accept them for the sake of stability. My hon. Friend was quite right when he said that instead of tackling these matters piecemeal we should have a look at the principle underlying the whole concept of taxation and have such a bumper Budget.
I warmly welcome the proposal to revise the basis of taxation on bingo. I cannot understand why a similar step is not being taken in relation to casinos. I endorse the concept of a tax on gambling—in many ways it is the perfect tax—but like other taxes it must appear to be equitable otherwise we run the particular risk of driving gambling underground. I regret that this year the Chancellor has not rectified the basis on which we tax casinos in the same way as he is rectifying the basis upon which we tax bingo.
I also warmly applauded the objective my right hon. Friend set himself when bringing forward the proposals dealing with the disallowance of tax relief upon the interest of certain loans. Upon looking at the Finance Bill, setting out the detailed implementation of these proposals, I begin to wonder whether this may not be quite as easy as was supposed. There is a danger that the proposals will not have the effect of reducing consumer expenditure, but may simply have the effect of altering the way in which we finance it.
The basic concept of these Clauses is to disallow tax relief on interest except, mainly, on the interest of loans for the purchase of property. How do we determine what is the purpose of a loan? It is obviously relatively easy to ask the borrower what the purpose of his borrowing is intended to be, but surely the reply given is an ostensible answer.
It might be a truer test to ask what would have happened had the loan not been granted. If a loan for the purchase

of property were not granted, and the purchase were not proceeded with, that would show that the purpose of the loan was for the purchase of property. But, the loan not having been made, if the transaction had still gone forward and had been financed in another way, perhaps by making creditors wait longer for their money, it could be argued that the purpose of the loan was not so much to finance the purchase of property as to repay the man's creditors. It is difficult to determine the exact purpose to which it is intended to put a loan.
Is the concept underlying the proposals based on the subjective test of finding out from the borrower what is the purpose of the loan, or is the test to find out exactly how the loan is secured? The subjective test is perhaps open to the objections which I have mentioned. Equally, if the test is to be the nature of the security, I foresee certain difficulties.
A young couple who raise part of the money needed to purchase a property by raising a mortgage would be entitled to tax relief on the interest. If they borrowed the balance, or part of the balance, from, for example, a grandfather, would the interest on that be allowable if the grandfather took a second mortgage on the property, or had it secured only by a bill, or not secured? This is not clear from the Finance Bill. If the test is how the loan is secured, and if it is necessary to take a second or a third mortgage so long as some value in the asset remains unpledged, the result will be that real estate will be pledged right up to the hilt, and I doubt whether this is desirable.
Stretching fancy a little far, I suppose it is conceivable that people wishing to raise money and to get the advantage of tax relief on the interest might enter into unnecessary purchases of property. If they have no mortgage on the property they currently occupy, they might deliberately move, so as to raise a mortgage on a new property on which they will get tax relief, and they might use the money from the sale of their existing property for the purchase they have in mind. If people have to borrow money on mortgage, they will borrow as much as they can. What will be the effect of this upon the resources of the building societies? In recent months there has


been evidence that the building societies do not have bottomless pockets.
Although I foresee difficulties both in the subjective test and in the test on how the money is secured, I hope that my right hon. Friend will come down on the side of the subjective test, and allow tax relief on the interest on loans, regardless of how they are secured, so long as the borrower is able to demonstrate that he has borrowed money for the purposes permitted in the Bill.
I entirely endorse the underlying strategy of the Bill, the concept of effecting moderation in consumer expenditure, but I wonder how far this will prove effective. For the reasons which I and other hon. Members have indicated, sophisticated borrowers will be able to get round the provisions in the Bill in such a way that they will not be hampered. I doubt whether the proposals will have any effect on unsophisticated borrowers. A substantial amount of borrowing currently goes on at exorbitant interest rates, for which no tax relief is claimed simply because people do not know that they are entitled to it. I attribute this borrowing to the phenomenon mentioned by my hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon), that it is difficult to restrain consumer expenditure. I agree with my right hon. Friend that this is needed, and I regret that my right hon. Friend has not seen fit to introduce measures to restrain borrowing for this purpose. There is a loophole here through which consumer expenditure will rush in ever-increasing amounts, which leads me to doubt the ultimate success of the Measures proposed.

7.56 p.m.

Sir Gerald Nabarro: The Chancellor of the Exchequer came to the House on 19th March, 1968, and raised additional taxes of £923 million in the full year. He returned to the House on 22nd November, 1968, and raised further additional taxes of £250 million in the full year. He came back to the House again on 15th April, 1969, and raised further taxes of £340 million in the full year. His objectives throughout are said to have been to restrain consumption and to make progress towards increased exports, diminished imports and

the redress of a grievous deficiency in our balance of payments. He failed throughout last year; he will fail throughout this year, for the simple and fundamental reason that his Budget strategy is entirely wrong.
It is futile for the hon. Member for Chislehurst (Mr. Macdonald) to talk about the Government restricting borrowing and restricting consumption. People cock a snook at Her Majesty's Ministers, notably Treasury Ministers. They are the most derided and ridiculed people in our country, and rightly so. Nobody trusts them, every scheme that they have presented to the House for financial solvency during the last five years has failed, and why should repetition of the same policies in 1969 succeed when they have so miserably failed in each of the preceding four years?
The Economist got it exactly right on 12th April when it wrote this in its leading feature contribution under the heading "No, Not Again":
Experience in both Britain and the United States last year suggested strongly that increases in taxes are now the rather wet noodle among weapons of economic restraint. They proved far less effective in curbing total demand than most supporters of last year's British and American budgets had hoped. This is awkward news for the British Treasury, which for the past five years has courageously believed that by flogging British taxpayers hard enough you must eventually bring the whole economy to rights, especially since such flagellation is well known to be good for the taxpayer's soul. However, the Treasury has a traditional way of handling awkward, new, empirical international, economic evidence that does not accord with its previous prejudices. It generally most resolutely ignores it. A year ago Mr. Jenkins imposed upon the British people a record increase in taxes, which signally failed in its purpose of putting the British economy back on course. Next Tuesday"—
that was 15th April last—
it is almost universally expected that Mr. Jenkins will announce another dollop of tax increases, which by itself is unlikely to work either.
I read that passage to the House because it entirely endorses my own views. Every successive increase in taxation by Socialist Governments during the last five years has led to two things: first, continuing inflation on an increasing scale and, second, a worsening situation with our balance of payments. I have no doubt that the £340 million in the full year, which is the purpose of the Finance Bill, will have exactly the same effects.
I pass constructively to what in our contemporary situation and circumstances are the seven Budget requirements. I state them shortly, and I hope that the Chief Secretary will find them impeccable. I am sad to say that the Bill will give effect to none of them. The first is a strong £. I pause to observe that the £ is as weak today as it was during the month following devaluation of sterling in November, 1967. There is no sign of increasing strength in our currency.
The second requirement is, of course, a substantial surplus on our balance of payments in order to endeavour to repay our mountainous debts overseas. Last year's deficiency was of the order of £458 million on visible account. I see no evidence that we are running a surplus at present, or are likely to do so in the coming year.
The third is much greater investment in private industry. There is no evidence of an upsurge of investment in private industry for one simple reason which I give the House as a businessman. There is no confidence in the Socialist Government or in their policies.
The fourth is an acceptable prices and incomes policy. The great majority of the Labour Party which is governing the country today does not believe in the present prices and incomes policy and indeed, is largely in revolt against it. My side of the House does not believe in a statutory prices and incomes policy and certainly not as an effective instrument of budgetary policy.
The fifth is that there should be no increase in today's figure of unemployment, which is of the order of 2¼ per cent. Those who are knowledgeable in these matters say that there is an upward trend of unemployment which will manifest itself steadily throughout this year, and the anticipated level by the year's end is three quarters of a million wholly unemployed.
The sixth is a restriction of voracious public expenditure of the present time. It is all very well for Treasury Ministers to apply squeezes to private individuals, private companies and the private sector of industry and yet allow the most gross extravagance on the part of nationalised industries led by the electricity supply industry, which does little to raise its efficiency factors.
The seventh, and last, requirement is, of course, that the Chancellor this year should have budgeted only for a sufficient aggregation of revenue to meet his public expenditure requirements plus a modicum of cover for finance below the line, augmented by public savings. He should not have called in aid a surplus of more than £800 million which he says he will use, though I do not believe him, for the redress of public debt. On the contrary, he has much more devious purposes in mind than that He proposes to use that money as a surplus next year, a year which he anticipates will be the last in which he will present a Budget before a General Election, to reduce the taxes and try to claw back some of the millions of votes which have been lost to the Labour Party in recent years. He will, of course, fail in that last endeavour. The Labour Party has passed the point of no return.

Mr. Roy Roebuck: Oh.

Sir G. Nabarro: The hon. Gentleman with a miserable little majority of 300 will not be here in the next Parliament. He will be hoofing it round the Labour-held constituencies hoping that somebody will retire. I will not go into electoral considerations. Did I hear the right hon. Gentleman say, "Why not?".

Mr. Diamond: I apologise for saying anything while sitting down. I was wondering which particular Clause this had reference to or whether the hon. Gentleman had not the Bill in front of him.

Sir G. Nabarro: The right hon. Gentleman came in only two or three minutes ago when I had been speaking for 10 minutes or so. He missed the earlier part of my speech. He is not in touch with matters. If he listens carefully he will no doubt get switched on. I was giving the seven budgetary requirements needed in our present financial circumstances. This Budget fulfils none of them, and that is why the Chancellor's budgetary strategy will fail.
I do not propose to apply myself as did the hon. Member for Heywood and Royton (Mr. Barnett) and the hon. Member for Ashton-under-Lyne (Mr. Sheldon) to a series of Committee points and call


it a speech. I will deal with those matters during the four days of the Committee stage on the Floor of the House. I wish to say something generally about budgetary morals which I thoroughly dislike in the form of the behaviour of the Chancellor on Budget day. He had a lot to say about purchase tax.

Mr. Roebuck: And the road fund licence.

Sir G. Nabarro: The hon. Member has just come in. He took his seat two minutes ago. If he wants me to deal with the road fund licence I will do so, but at present, in case he did not hear me, I am dealing with purchase tax.
The chancellor made a statement about purchase tax. He said that he was keeping the rates constant, that he proposed to broaden the base of purchase tax and to apply the tax to a number of items of household goods. He then proceeded to mention two or three trifling items such as paper handkerchiefs and plastic wallpaper. He was not man enough to stand up and say "I propose to broaden the base of purchase tax by applying a 13¾ per cent. rate to three major items of household expenditure all of which are essential in character. I propose to tax for the first time bed linen, blankets and towels." He left the trade to stumble across it a few days later. That is very deft, devious, bordering on dishonest behaviour.
The right hon. Member for Gloucester (Mr. Diamond) would not do a thing like that. [An HON. MEMBER: "Oh."] Of course he would not. He would have been the first to talk about towels, bed linen and blankets. He would not like to mislead anybody, nor would I. In fact, the Chancellor of the Exchequer has vastly complicated purchase tax by his proposals in the Budget. Look at the four rates that we have now: 55 per cent. or 11s. in the £; 36⅔ per cent. or 7s. 4d. in the £; 22½ per cent. or 4s. 6d. in the £; 13¾ per cent. or 2s. 9d. in the £.
The Chancellor made some footling excuse that he could not level out these rates this year. He is going back to the old complications of where the previous Labour Government left the purchase tax in 1951 with seven rates, 90

per cent. at the top and 5 per cent. at the bottom, which the Tories cleaned up to 25 per cent. at the top and 10 per cent. at the bottom. Those who doubt the Tories' capacity to reduce taxation should note the span: 90 per cent. at the top and 5 per cent. at the bottom was where we found the rates in 1951; where we left them in October, 1964, was 25 per cent. at the top and 10 per cent. at the bottom. Now they have gone back to 55 per cent., 36⅔ per cent., 22½ per cent. and 13¾ per cent., all designed to cause the maximum of inconvenience and extra work to wholesale and retail traders.
The imposition of the extra purchase tax, like the imposition of the selective employment tax, is all highly inflationary. I do not wish to go through every measure of increased taxation. I will deal with them all seriatim and I hope penetratingly in Committee. In a Second Reading speech, I content myself by saying—[Interruption.] It is nothing to laugh at. It is a very serious matter. I content myself by saying that £340 million of extra taxation is £340 million added to retail prices, plus the premium of the traders who levy the extra taxes, and that premium raises the addition to prices to a figure which I calculate to be in excess of £400 million.
Last year retail prices rose by 1s. 3d. in the £ and wages by a commensurate sum. During 1969, as a result of the Chancellor's nefarious fiscal habits, there will be an increase in retail prices, in my view, approaching 1s. 6d. in the £. Wages will rise by a similar amount, and we shall be gripped by the same inflationary tendencies as stigmatised all our economic efforts in 1967 and 1968, but with the inevitable result that at the end of 1969 we shall be no nearer our goal of balancing our payments overseas.
I have one last word to say, and it is about Clauses 18 and 19. I think that the hon. Member for Chislehurst had it nearest to right. What he was trying to say in a mixed up and rather verbose fashion was that these two clauses are inoperable as they stand. Even the Chief Secretary talked about the difficulties that the accountants would have. Already a dozen accountants, bank managers and businessmen have been after me to try to interpret what these Clauses mean and whether the interest on personal overdrafts in widely differing circumstances


will be admitted as a charge or otherwise against calculating liability to income tax and surtax for the individual.
I am not a tax consultant. I cannot even do my own tax papers, so complex are they after five years of Labour Government and the excessive Finance Acts of recent years. I would not attempt to interpret what is written in Clauses 18 and 19, but I know that these provisions are wholly bad and I shall argue against them in detail in Committee. I shall ask my party to be quite explicit in saying that immediately we resume office these provisions will be cancelled for the simple reason that if a working man—and I am the epitome of the working man—

Mr. Roebuck: Alf Garnett.

Sir G. Nabarro: Alf Garnett earns a very large income and pays surtax at the top rate. The aggregation of Alf Garnett's income tax and surtax is at the rate of 18s. 3d. in the £. The hon. Member for Harrow, East (Mr. Roebuck) will never see an income of that magnitude or pay tax on that scale. He is much more likely to be paying income tax at 4s. in the £, denoting the meagre level of his own earned income. I think I am perfectly in order in responding to that irrelevant interjection.
I object to Clauses 18 and 19 for the very good reason that if a working man chooses to diminish the amount of his income by borrowing money from any source whatever, the cost of borrowing that money should, in logic, be set against his income, for the whole of his income is subject to income tax and, if it is of a higher order, to surtax. To say that he can borrow and allow the interest as a charge only for a house or for land or for house improvements is to single out one type of consumer expenditure in preference to another.
That is the sort of discrimination indulged in by a Labour Government—a government of meddlesome Matties, Nosy Parkers and busybodies, prying into the private affairs of individual citizens, which I, as a Tory and a capitalist, denounce as being none of the affairs or the functions of the Government. That is the private business of the individual citizen, and the Government should keep out of it.
I shall urge upon my party the repeal of Clauses 18 and 19, if they reach the

Statute Book, and certainly I shall vote happily against them as opportunity permits.
The whole Bill is bad. It is as bad as any Finance Bill since 1964 on account of its longevity, on account of its complexity, on account of its inflationary tendencies and on account of £340 million heaped on the backs of long-suffering British taxpayers after they had already shouldered manfully £250 million from 22nd November last and £923 million from 19th March, 1968. It is monstrous that the Labour Government should still remain in office after this gross contravention and travesty of every election promise that they made.

8.20 p.m.

Mr. Ted Fletcher: I must resist the temptation to follow the argument of the hon. Member for Worcestershire, South (Sir G. Nabarro), if indeed one could follow his argument. I want to direct attention to what hon. Members may consider to be a trivial aspect of the Budget compared with the £340 million that the Chancellor is raising through the Finance Bill.
I agree with only one thing that the hon. Member for Worcestershire, South said; namely, that when the Chancellor made his Budget speech there was some doubt and confusion about the increases in purchase tax that arose from the ending of the exemption of those goods in Schedule 1, Group 2, of the Purchase Tax Act, 1963.
I particularly direct attention to the purchase tax, for the first time, on hand knitting wools. I do this for two reasons. First because I have a constituency interest as a large firm in Darlington provides employment for the citizens, and, secondly, on the ground of equity, because this is a tax on the leisure activities of millions of women in this country. Many of them are elderly widows and pensioners who can ill-afford the additional tax of 3d. for every two shillings they spend on an ounce of wool.
Hand knitting is possibly the oldest form of do-it-yourself activity in this country. It seems that we are penalising the most industrious section of our community by imposing a tax on hand knitting wool. It seems a most inequitable tax on an activity that is socially important in this country.
One of the greater novelties is that, while children's manufactured garments remain free of tax, the mother who knits clothes for her children will now, for the first time, have to pay tax on her raw materials. This is quite inequitable.
This tax will have certain effects on the retailers of wool. It will mean that shops which exclusively sell hand knitting wool will have to face the fact that the tax will mean a reduction in their turnover. This may well lead to increased prices in addition to the 3d. on two shillings per ounce of wool.
Apart from the tax on the retailers, we must also consider the tax on the woollen manufacturers. It is estimated by Patons & Baldwins, a large firm in Darlington, that a ten per cent. reduction in the sales of hand knitting wool will lead to the loss of about 300 jobs—and this in a town in a development area where unemployment is twice the national average. It will certainly have a big impact upon a town which is using all its energies to attract new industry. Therefore, from an employment point of view, it is important that the Chancellor should consider the effect of this tax not only on the people in Darlington, but in other woollen manufacturing towns.
It will also have an effect on production, because the machines used to manufacture knitting wool are special purpose machines which cannot be converted to other jobs. If these machines are idle there will be a big impact on the export trade in wool. I am informed by Patons & Baldwins that 18 per cent. of their turnover now goes for export. Its export prices are maintained to some extent because it has a good home market. If the home market is reduced, this will have an impact on import prices and this will not increase, but possibly decrease the amount of exports.
We have the anomaly of an imposition of purchase tax for the first time which discriminates against what I have described as one of the oldest forms of do-it-yourself activity. The policy of successive Governments has been to encourage leisure pursuits. This tax is penalising millions of women, many of them quite elderly, who take up knitting as a hobby, which adds to our Gross National Product. This inequitable tax will mean that many of these women will knit less.
We had reference this afternoon to the Health Service charges. I think they are deplorable and I hope that on another occasion I shall be able to say something about them. One thing which can be said about the Health Service charges is that those on supplementary benefits can make application for those charges to be met. But the elderly widow or the pensioner who knits is unable to get an increase in supplementary benefits to help pay for the increased cost of knitting wool. This tax will penalise widows, pensioners and others who take up this leisure time activity, and it will have a great social consequence.
I ask the Chancellor to give very careful consideration to the impact that this tax will have on the industrial activities of woollen manufacturers in my area and on the social activities of millions of women in this country. I realise that this is a Committee point and we have not yet reached the Committee stage, but I ask my right hon. Friend to look very carefully at this imposition and to ask himself whether it is possible, before we reach Committee stage, for the Government to review this imposition and to decide to reduce or abolish purchase tax on hand knitting wools.
I have been advised, in answer to a Question, that the total income from increased purchase tax, not only on hand knitting wools but on yarns and rug yarns, will be about £5 million. This is a small sum of money compared with the £340 million that is being raised through the Bill. It will certainly do a lot of harm to leisure-time activities for millions of women. It will mean that the mother wile knits for her children and who, for the first time, now has to pay purchase tax on her raw materials will possibly purchase manufactured garments. This in turn will mean that there will be an increase in the sale of manufactured garments on the home market, leaving less for exports. This is an anomaly, because the woman who knits for her children is being penalised and she may decide to purchase for her children manufactured goods which are free of tax.
With these considerations in mind, I urge my right hon. Friend to think very carefully about the impact of this tax. I hope that when we reach Committee stage he will be able to assure us that, after consideration, he has decided to


withdraw purchase tax on hand knitting wools.

8.30 p.m.

Mr. John Nott: I hope the hon. Member for Darlington (Mr. Ted Fletcher) will forgive me if I do not follow him on his particular subject, particularly since we shall have a full opportunity of discussing it during the Committee stage of the Bill. I refrain from following him only because several of my hon. Friends and other hon. Gentlemen may wish to speak.
Since the Second World War the British economy has been characterised by levels of employment and prosperity which were undreamed of in the 1930s; and apart from the present time when four years of incompetent economic management has pushed unemployment in this country to the highest level for decades—and my belief is that this Finance Bill will push unemployment higher still—this country's productive capacity has been more or less fully uitilised. While we have fallen drastically behind in the international race for growth and, more alarming still, in the expansion of our existing productive capacity out of which future growth in visible trade must come, this country still remains today the pleasantest, happiest and most tolerant society in the whole world in which to live. In our discussion of the Finance Bill we should remember that this, after all, is the highest economic return of all.
Yet in spite of this the British people are not satisfied, and I believe quite rightly; for it is only out of a higher growth than we have had in the last three years that better housing, health, and education, and greater leisure too, can really come. We cannot ever more maintain the stability and relative tranquillity of our society unless some dramatic economic break-through is soon obtained. The revolution of rising expectations is at work in this country, and if those expectations are to be frustrated, then eventually the uglier facets of our society will show through.
In the context of this Bill and of the Budget which preceded it I am left gasping that an able man can bring forth a measure which is so utterly lacking in direction and in vision. It seems to me that this particular Budget and this Bill have no strategy at all. At least last year there was a theme—the achieve-

mentof a massive surplus as a forerunner of better things to come. But in this Bill disillusionment has taken over.
In spite of the inherent danger of the position to which I have referred there are however, two grounds for optimism as we debate this Bill today. The Minister of Technology was right—and that really is an economic miracle—when he talked the other day of the huge reservoir of talent, energy and imagination which exists among the younger middle management in British industry today. This middle management is just bursting to break out if only some day some Chancellor from somewhere will come along and give it the opportunity to do so.
It is a tragic thing that practically every Chancellor of both parties in this country since the war has been completely lacking in the only commercial or industrial experience that really counts; namely, that of having had to work his way up through a competitive-minded firm. This is not the fault of Conservative and successive Labour Chancellors. It is the aftermath of the war and of our particular imperial past which preceded it. Only now is middle management emerging which was not trained and educated in, and did not have, the outlook which was necessary to run an empire and to fight a war. So now at least we have a glimmer of hope, and it needs a Chancellor to bring this talent out.
My second reason for hope is my belief that even more important than the release of talent, the task requires a fixity of purpose, a toughness, even a bloody-mindedness on the part of a Prime Minister and a Chancellor of the Exchequer of this country. I do not believe any Socialist Prime Minister, however genuine he may be, can possibly succeed mainly because it is impossible for him to implement what is necessary with the party which he has behind him. I believe that my right hon. Friends can and will.
I come now to specific comments on certain Clauses of the Bill. Naturally, I start with overdrafts. The whole purpose of the investment mechanism, as I understand it, is to put spare money to the most productive use. What better method could there be than for those seeking a fixed return to pass their savings through the banks and insurance companies to those who wish to take the


risks? The overdraft against securities, which is what the Chief Secretary is aiming at, the overdraft against an endowment policy of one man, is nothing but the application of the fixed-interest savings of another into the type of risk investment on which the future of this nation depends.
Moreover, the equal evil of this narrow-minded move is completely to remove the last remaining method by which the middle-income groups could at least establish a minimum degree of true financial independence. As the Chief Secretary must know, the best men enter industry to make their fortunes, and there is nothing wrong with that. The motivations of politicians and administrators are entirely different. The best men enter industry to make their fortunes, and we should encourage them to do it. If more young management in particular had the wherewithal, which it cannot have today, to cock a snook at the boss, its independence of judgment, its ability to innovate and its imagination would be much enhanced.
By removing options in the 1966 legislation whereby the capitalist was able voluntarily to share his wealth with the manager, and by removing the life policy against securities in this Bill, the Government have successfully prevented the only means by which a man of no inherited wealth but of some ability was able to achieve some financial independence of his own. It is one of the real ironies of Socialist rule that the rich should be infinitely richer here today than they were four years ago, but that the ordinary man, the young executive, or the middle-aged man working in British industry, on whom the whole future of this country depends, is in a position of not being able to save a single penny. The net result of all this is that the best young men will join the actors and the actresses: they will move abroad, and they will work for United States companies and firms. If that is the Chancellor's objective, it is very strange indeed.
The Chief Secretary has a look of incomprehension on his face. I do not expect him to understand this, but I make the statement just the same. Just as no Socialist appears to understand that it is the pacemakers of a society who make a country rich and strong, so they fail to

understand the rôle of profits. I do not think that our present Chancellor really understands the distinction between sales and profits, and profits and cash flow, and I am sure that Treasury officials do not understand it either. If the right hon. Gentleman is aware of it, it is difficult to understand how he can allow cash grants for new investment in plant and equipment which cost this country up to £400 million a year and then more than wipe out the whole of that amount by raising corporation tax. The net effect is to make a transfer payment whereby the profitable companies subsidise the capital investment of their unprofitable brethren. This is an achievement which not even the Secretary of State for Social Services in his maddest moments could achieve.
It is, further, clear—and here I must charge the Chief Secretary with something; he understands, but he prefers to forget—that our withholding taxes on British companies, on which the export achievements of this country depend, are now about the highest in the world. On a full distribution of corporate profits they are now at 68 per cent., and on a two-thirds' distribution of corporate profits they are 60 per cent., compared with the 1964 position of 53¾ per cent. It is an utter misconception, and quite wrong for the Chancellor and the Chief Secretary to claim that our tax rates on companies are lower than in most countries abroad. In almost every comparative case, the investor whose funds provide the capital for innovation and the expansion of capacity is worse off now than in almost any other country. I do not want to go into the question of ploughed back profits, but I hope to do so in Committee.
I come now to my major charge against this Government. It is the unique and novel means which they have adopted in the last four years of destroying the confidence of businessmen at home and of countries overseas in the achievements of this nation. They have done so by setting targets so impracticable, so euphoric and unattainable, that when they are not met the British people feel a deep sense of loss and shame.
I now quote some examples: there is their past obsession with the incomes policy, the maddest and most negative policy of all. Now there is their present


obsession with strikes, which represent about 4 million lost days a year against 280 million lost through sickness.
The problem in this country was never the wage element in costs, it was never strikes. The problem is the gross restrictive practices of management and men, the fact that senior management is blocking the way of younger management who want to get on, and inadequate investment in plant and machinery. Those are our problems, not strikes or the wage element in costs, about which the Government have exerted almost three years of misdirected energy.
On this Bill, the more relevant obsession is their obsession with the trade figures. It is almost unbelievable. Do the Government not know that this country has had a surplus on its current trading balance only in seven years out of the past 175 years? If it is true that a surplus on our current trading balance is that vital, this country would have been bankrupt in 1850 and the Chief Secretary knows it. During the time when this country was incontestably the most powerful nation in the world, we ran a persistent deficit on our current trading balance.
It is the invisibles which have kept this country in surplus year by year for 100 years. It is the service industries and overseas investment which have been our life blood. One has only to consider the figures to see that. Today, invisibles represent approximately 30 per cent. of total world trade. It is a field in which we, together with the United States, dominate the world and one in which growth is far faster than it is in the world trade in manufactured goods. Yet, in a field which has been crucial to this country for 100 years, the Government have put the emphasis of all their taxes. They have levied S.E.T. of £600 million, but, more than that, it is their negative attitude towards invisibles, their incapacity to see this fact, which is the most damaging of all.
Lastly, I turn to the make-up of our invisible receipts. In this connection no long-term thought has been given by the Government to the crucial heading of our investment income in future years. A glance at the capital account will show a declining deficit on capital flows, for which the Government misguidedly lavish

much praise upon themselves. But our continued investment overseas is the very seed corn from which our invisibles must grow in future years. If the growth in our investment receipts had not been over 200 per cent. between 1952 and 1964, where would we in this country and the Government be now?
I can list the fields for study on the capital transaction side only very briefly, concentrating on those which deserve attention and have had none at all. First is the codification of our exchange control regulations, which are a jungle. Perhaps the Chief Secretary wants his £95 million in stamp duty revenues. Let him have it if he must, but let us simplify our stamp duty laws. Then, he must look at the premium dollar. It is monstrous that British companies are being forced to pay a premium of 60 per cent. to invest overseas. Companies are often unable to set up sales subsidiaries in, say, Japan or Germany without being forced through the premium dollar market at these rates. Why do not we have an urgent review of the requirements governing the remittances of overseas profits to this country? Why are companies forced to remit their profits here when they may be needed overseas for expansion, with the companies concerned then being forced through the premium dollar market at 60 per cent. in a later effort to expand their facilities? These are the narrowest of short-range measures, damaging to this country's future.
We must look at some sort of E.C.G.D. help for investments overseas, just as the Americans provide through A.I.D. Why must we have this paranoia with manufactured goods? There should be E.C.G.D. cover for investment as well as for the movement of goods. This is done in many countries, notably in the United States, with great success. Although suggestions of this type have been made in various reports—these ideas have been well ventilated—we have heard nothing about them from the Government.
We must be an outward-looking nation if we are to survive and we must thrive on cross investments and the free flow of trade. It is not by grandiose technological communities that we will prosper. The exchange control regulations must be simplified so that companies can invest abroad.
Why are we not giving more help to companies which are trying to borrow in Euro-dollars to finance their expansion overseas? It is often not possible for companies to give the necessary guarantees to borrow in foreign currency. After all, I am merely asking for the same treatment as the Government are giving to local authorities and others. The British people have been deluded by the Labour Party into believing that it lies in the Government's hands to make the people rich, to make the poor happy, to restructure industry and to cause a technological breakthrough. It does not lie in the Government's hands to do those things, and the British people are beginning to realise this. Because so many Labour promises have been broken, the people are disillusioned with politics and with all politicians.
I hope that the Opposition Front Bench and the Conservative Party generally will make no promises. We should say repeatedly that the consumer can be safeguarded from monopoly, that the poor and sick can be protected from misfortune and that individuals can give of their best only in a competitive climate untrammelled by restrictions and, as far as possible, free from subsidies.
We need a society in which incentive and profit are respectable goals and in which the rewards of success are sufficiently high to compensate for the penalties of failure. This may seem a harsh doctrine, but in a world in which national Government increasingly do not have that much control over the destinies of their own countries—the Chief Secretary knows that only too well—it is the only doctrine which can preserve what I earlier described as the tolerance and happiness of our society.

8.49 p.m.

Mr. John M. Temple: I congratulate my lion. Friend the Member for St. Ives (Mr. Nott) on making an absolutely brilliant speech. It was typical of the thinking of the up and coming generation in the Tory Party.
I have had the good fortune to have had a copy of the Finance Bill for a week, unlike my right hon. Friend the Member for Flint, West (Mr. Birch), who also made a brilliant speech, which goes to show the tremendous grasp he has of

the financial problems which face the country.
Having had this opportunity to study the Bill, I find absolutely zero incentives in it. Having been bemused by all its complications, I was interested to hear the Leader of the House speak about the Committee stage of the Bill. He said that there would be four days on the Floor of the House and that the minutiae would then be dealt with upstairs. There will be about 150 pages of minutiae of fantastic complications dealt with in Committee upstairs.
I have been studying recently the trend of the type of man who gets the chairmanship of a big public company in this country. A generation ago chairmen of big public companies had grown up through their companies and had an intimate knowledge of the trades with which their companies were associated. Today half the chairmen of public companies are chartered accountants. That is because they have to have an intimate knowledge of the tax structure. It is a severe comment on the efforts of all political parties that they have complicated the tax structure to such an extent that today only brilliant chartered accountants can be looked on as the chief administrators of these enormous corporations. I welcome the fact that time and again my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) has said that one of the main planks in the Tory Party's programme are proposals to simplify the tax structure.
Before referring to some aspects of the Bill and two new taxes which have not been mentioned so far in this debate, I comment on selective employment tax. My hon. Friend the Member for St. Ives pointed out the tremendous contribution which invisible exports make to our balance of payments. The taxation on contributors to those invisible exports has been very serious. The impact of selective employment tax on the insurance industry and all those industries which are making such a contribution is very severe.
Another industry which has been seriously hurt is the tourist industry. I believe that it is cheaper now to have a package holiday on the Costa Brava than in Bournemouth or Blackpool. More serious, and this is what top tourists,


members of the jet set, find when they come into London, is the lack of personal service. When they go to London, Paris, New York, or Mexico City they require personal service. They do not want to have to get out a do-it-yourself kit to clean their shoes. This tax is severe in its effect on first class personal service for which we have been noted down the years.
I shall pick out of this rag-bag of a Bill a few general comments. My right hon. Friend the Member for Flint, West commented on one matter to which I have given some attention; exemption in future of gilt-edged securities from capital gains tax. The Chancellor has done this at a time when gilt-edged securities are virtually at the bottom. If under 40 is not the bottom for War Loan we can start tearing up all our gilt-edged securities. All those faithful people who have held gilt-edged down the years have been cheated by the fact that in future they will not be able to set off capital losses against other capital profits when they sell them.
My right hon. Friend the Member for West Flint, proposed from the Dispatch Box a few years ago that we should exempt local authority loan stocks from the provisions of capital gains tax. Today the redemption yields of local authority loan stocks with similar dates of redemption to those for gilt-edged are nearly ½per cent. worse. The public should know the great prejudice which the Government have against local authorities. This, I think, may well be because so many are controlled by Conservatives.
I do not know who dreamt up the idea of disallowance for tax purposes of interest on loans. The scheme will be riddled with anomalies. If a person buys a house today and then purchases a washing machine, a washing-up machine and a night storage heater, he cannot borrow money to finance the purchase of those items and set off the tax on that borrowed money against his income. But if, having equipped his house with those items, he sells it complete with them the buyer of the house will be able to borrow money against the total value of the house, including all those fixtures and fittings.
If a prudent farmer had to pay estate duties and also wanted to improve his

farm, and paid the estate duties out of his own pocket and did the improvements on borrowed money, he could set against his taxable income the interest on the money borrowed for improvements. But if he did this the other way round and financed the improvements himself and borrowed the money to pay the estate duty, he would not be able to set off the interest on the estate duty borrowing against his gross income. That is a glaring example of a different approach to exactly the same problem attracting entirely different rates of tax.
Another new tax which has not been mentioned is the proposal with regard to estate duty on discretionary trusts. I have only a modest knowledge of discretionary trusts, but I know that they are all different. They have only one common factor, which is that the income on them goes to what is called a "class" of beneficiaries, which may be very wide. Within a "class" of beneficiaries who could benefit under a discretionary trust there are probably a number of infants. They may benefit for, say, 1969 or 1970, and may not benefit again throughout the whole of their lives. Who is to keep track of them as they grow up? They may die in Timbuctoo, New York or New Zealand. Are they to send from heaven or wherever else they go a telegram to trustees they have never heard of telling them that they have passed away, and that there will be some estate duty payable by the trust, which perhaps was wound up 50 years before, which is a more than probable state of affairs?
I do not know whether in the future it will be possible to get people to serve as trustees on discretionary trusts, because the trustees will be liable for the estate duty. As I understand discretionary trusts, the trustees usually have power to dissolve the trust and distribute the assets. If so these may well be a charge for estate duties charged on a trustee who has died 50 years before and on a non-existent trust which has been distributed 40 years before that. These are not impossibilities with regard to the legislation proposed on discretionary trusts. I recommend the Chief Secretary to read the advice of the tax correspondent of the Financial Times, which is that going back a number of years should be limited to seven. That would be the realistic thing to do. It is unrealistic to think that trustees can keep


tabs on beneficiaries who may have benefited to a very limited extent many years before.
Another tax which has not had a mention is the new betting duty. A couple of years ago the Chancellor introduced a general betting duty, last year he doubled it, and earlier this year the Chairman of the Horserace Betting Levy Board, Lord Wigg, was responsible for the doubling of the betting levy. Now we have the Chancellor introducing a tax on bookmakers' premises, which will in effect be equal to a one per cent. tax on turnover. It is extraordinary that time after time a general betting duty or type of betting duty is increased. We have constantly advocated from this side of the House that there should be a differential between on- and off-course betting. The Chancellor claims to have brought this about by increasing the duty on off-course betting. To me, that is very much an Irishman's rise in betting duty. I seriously warn the Chief Secretary and the Government that there may well be a big revulsion by punters against these very high rates of duty, which of course will be paid by them.
We cannot go on increasing betting taxes or once again we shall face the situation where we are driving it underground. That would be exceptionally undesirable. I make the plea that this duty, which will be payable from 1st October and will amount to £7 million, should be capable of being paid by instalments.
The final insult in the Bill, which is so unconstructive, is the swipe it takes by the purchase tax imposed on potato crisps and pet foods. This may seem part of the minutiae of life, but if one fries one's own potato chips no tax is attracted, and if an old-age pensioner is well enough to go out and buy a penny worth of pet food in the local butcher's or fishmonger's no tax is attracted. But if he is infirm and has to rely on tins of pet food, a tax of 22 per cent. is attracted. I estimate that this tax on pet foods will cost an old-age pensioner keeping a cat or dog about one shilling a week extra. Just how mean can one get with pensioners who are not capable of going out and buying a pennyworth of pet food from the normal supplier and has to

buy food carrying a 22 per cent. purchase tax.
I am more disappointed with this Budget than ever before. It is a rag bag, and I am afraid that the Chancellor has lost his position in the leadership stakes in the Labour Party. I am not surprised. Any Chancellor who could bring in such an unimaginative Budget deserves to lose his position in the hierarchy of his party, and this has happened. But who has taken his place in the stakes? Someone, I am afraid, who failed the country and brought about devaluation. Perhaps it requires a devaluation in order to get him promoted once again to the height of being considered as an alternative leader to the Prime Minister.
I am afraid that what will happen as a result of the Budget is that prices will rise and that the in our pockets will once again be devalued. This is what is worrying our people at home and our friends overseas.

9.3 p.m.

Mr. David Waddington: My hon. Friend the Member for the City of Chester (Mr. Temple) will forgive me if I do not follow in any detail the points he made but I agree with him that those of us who have been fortunate in being able to read the Bill have found it a weary document. I tried it as bedside reading and was not impressed. We are not surprised that the Government have run out of ideas, and, indeed, remembering some of the crackbrained schemes advanced by the Government in 1964 and 1965, we should be rather glad that they have.
The history of the last four years is extraordinary. Every few months the Government come to the House and say, "We are sorry but we must once again impose more and more burdens on the long-suffering British public". Every few months the burden of taxation is increased. No hope of relief is ever advanced. We know what is needed. We want to give our young energetic people, on whom our future depends, some hope for the future. We want to tell them that if they use their initiative and try to achieve something in life there will be a reward for them. What hope is ever offered by the Government? None whatever.
A very important detail of the Finance Bill for that part of the world from which I come is the new tax on household textiles. I should declare a negative interest here, in the sense that I spend a very small part of my time making cotton handkerchiefs. I suppose that I should be glad that a new tax has been imposed on paper handkerchiefs. The Government are under a great misapprehension if they do not realise that there is great indignation and annoyance throughout Lancashire at the imposition of this new tax. It is not for nothing, as the Government well know, that Governments over the years have always exempted these particular products from purchase tax. I appreciate the argument advanced by the Chancellor for broadening the base of indirect taxation, and I accept it. But this seems to be the oddest of times to make this change. The Government are taxing necessities. The Chancellor is quite deliberately forcing up the cost of living, particularly for those who can least afford to pay.
I refer first of all to young people setting up home for the first time, who have to spend a lot of money on things like sheets and blankets, and, second, to the older people who find at the end of their working life that they very often have to renew these household necessities. In the course of his Budget speech the Chancellor said:
Household textiles and cloth were exempted from Purchase Tax in 1955 and 1958 in the interests of particular regional industries."—[OFFICIAL REPORT, 15th April, 1969; Vol. 781, c. 1023.]
This is quite right, but what has happened since to suggest that those industries which needed that assistance in 1955 and 1958 do not need it today? What the textile industry lacks is confidence in the future and in this Government.
It is a great pity and a scandal that the first Governmental response to the report of the Textile Council should have been a kick in the teeth. For months at Question Time we have been fobbed off by Ministers with the reply, "Wait until you see the Textile Council Report; then we will tell you what are our plans for the textile industry". What happened? On 30th March the Textile Council produced a report calling upon the Government to give assistance to the textile industry so that it may have some

confidence in the future. Then the Government, instead of giving the textile industry that support, give it a kick in the teeth in the shape of this new tax.
We must not forget the dislocation of trade attendant upon the bringing of a new line of goods into the purchase tax net. Last night I was speaking to a person concerned in the manufacture of furnishing fabrics. Between now and Whitsuntide he will have sold every single thing he has in stock, and he confidently expects that he will not get another order between Whitsuntide and late autumn. He also tells me that representatives of the Customs and Excise, who had to visit him to negotiate with him about the wholesale value on which the purchase tax should be levied, told him that between now and Whitsuntide representatives of the Customs and Excise are supposed to visit no fewer than 1,000 converters and finishers in Manchester to negotiate the sum on which purchase tax is to be levied. All of this is supposed to happen before the tax comes into force in a month or so. Make no mistake about it, the administrative burden is immense.
I wish that the Chancellor in his Budget speech had pointed the way towards a comprehensive reform of indirect taxation. Instead, he has singled out for special punishment an industry which is already facing special problems.
I hope that future Chancellors of the Exchequer will be more careful than the present Chancellor of the Exchequer was in the choice of words in his Budget speech. It is monstrous that words were used in the Chancellor's speech which had the effect of casting the whole trade into a state of turmoil for the next 48 hours. No one knew what tax changes on textiles the Chancellor had in mind. I hope that in future plainer words will be spoken by the Chancellor on Budget day.

9.11 p.m.

Sir Cyril Osborne: I warn the Treasury that it may have great difficulty in raising the amount of tax which it anticipates will be raised under the Bill. In many industries there is evidence of a slackening of trade. Orders are more difficult to get, profit margins are being squeezed, overheads are increasing, and the balance sheets next year will not be


as good as in the past year. The Chancellor, and the Treasury who advise him, should bear in mind that the figures may not turn out so well as they anticipate. I am not suggesting that there will be a slump at the end of the year, but trade is difficult, and this will be reflected in the amount of money that is raised by the taxes.
The Finance Bill imposes taxation of £14,464 million, which is by far the highest burden that has ever been put on the shoulders of the British taxpayer. The last Conservative Finance Bill in 1964 imposed taxation of only £7,169 million. It is costing the taxpayer more than twice as much to live under a Labour Government as it did to live under a Tory Government.
Additional taxation on the individual in the last five years may be summarised in this way. The tax on cigarettes in October, 1964, was 3s. 8½d. a packet, today it is 4s. 9½d.; whisky 30s., today 44s.; petrol 2s. 9d., today 4s. 6d.; beer duty, 8d., today 11d.; the road fund licence has gone up from £15 to £25; the radio licence from 20s. to 25s.; the T.V. licence from £4 to £6; income tax has gone up from 7s. 9d. to 8s. 3d., and the national stamp included in the S.E.T. has gone up from 21s. 4d. to 70s. 8d.—a fantastic rise.
As a result of these impositions the Government have achieved a wonderful record. Unemployment went up from 348,000 to 558,000. If the Prime Minister had given these figures to his audience on Sunday night, they would not have cheered him so much.
This Finance Bill adds a further £340 million in extra taxes. The reasonable question to ask is, will it be enough? Last year, in 1968, the Finance Bill imposed additional taxation—the highest amount of extra taxes—of £930 million. Hon. Members opposite were stunned, shocked and disheartened by this extra burden. But it did not prove enough. In November along came the Chancellor and said, "I am sorry, I want more", and in another mini-Finance Bill he imposed an extra £250 million.
My constituents ask me, "Will this additional £340 million taxation imposed by the Chancellor be enough, or will we have to face yet another autumn

budget?" I should like an answer from the Treasury.
My constituents then put to me the simple question: "What on earth do the Labour Government do with all the money they take from us?" My constituents would like to know. They would more readily bear the additional taxes if they knew that they were getting good value for money. They remember that this Government have imposed an extra £7,000 million taxes upon the country. They read that the Government have borrowed £3,000 million from foreign bankers, are still in debt and want to borrow more.
Local councillors have to try to explain to my constituents that the Government's proposals for better schools, hospitals, roads, sewerage schemes, and all the things which the Labour Party promised, have all had to be cut down, and the local councillors are quite unfairly blamed for it. The central government should provide the money for the things which they have promised. We have had to cut down on the Army, the Navy and the Air Force because we have not the money to pay for them. People naturally ask "Where does all this money go? Does it go down a bottomless rat-hole?".
The Chancellor gives two excuses for his actions. Firstly, he says that the Labour Government are increasing welfare payments to the poorer section of the community. That, of course, is true. He also claims that it is part of their tactics to redistribute the internal income of the nation and to take from the rich to give to the poor. But at the Labour conference in Blackpool last year the Chancellor made this boast:
Since we came to power public expenditure has risen nearly four times as fast as national income.
What a stupid boast. What a foolish thing to say. It is worthy of the prodigal son, to boast that one is spending four times more rapidly than one's income is providing. Is there any cause to doubt that, internationally, we are in debt and that we have to borrow more and more, knowing full well that we will never be able to repay it. This is what hurts me in what was once a proud and independent nation.
No redistribution of internal income can affect the one problem which bedevils the whole situation, and that is


the balance of payments. Balance of payments on current account, excluding capital movements, during the period of office of the present Government has been as follows. In 1965 there was a deficit of £91 million. In 1966 there was a surplus of £5 million. In 1967 we went back to a deficit of £399 million. Last year—and this is the figure that matters—the deficit amounted to £419 million. The present Finance Bill does not touch that problem of foreign indebtedness of £419 million. It is to the extent of £419 million that we are, collectively and individually, living beyond our means and spending more than we are earning.
That is the trouble. Individually, we are all smoking, drinking, gambling and spending on sport and amusement more than we are earning and more than we can afford. The Chancellor is trying to build up a Welfare State which in itself is fine but which the people are not prepared to pay for. That is why we are in this horrible mess and are always running to the foreign bankers in order to borrow money.
In his Budget speech, the Chancellor took pride in saying that he promised old-age pensioners a bigger pension. That is a fine idea and we all agree with it, but from where is the money to come? Certainly it will not come from this Finance Bill. It will be necessary to provide £250 million extra. Is it intended to ask the I.M.F. to lend it to us? If it is, we should be ashamed of ourselves for rattling the begging bowl abroad to pay for welfare arrangements of which we boast.
Our task is to increase the national wealth by at least £419 million in order to get out of our current debt. On more than one occasion, the Chancellor has said that we need an extra £500 million a year to repay old debts and build up our sterling balances against a recurrence of these problems. That means that, collectively, we have somehow to produce £1,000 million extra a year without paying ourselves a farthing extra for producing it. That is the grim reality which the Chancellor has failed to put before the public. In turn, it means much harder, much longer and much more productive work from everyone, and no more wildcat strikes.
This Finance Bill will not encourage anyone to work harder or to save. Who

is likely to exert himself in an extraordinary way to earn more money, be he in management or on the shop floor, if too large a proportion is taken from him in taxation? It is unreasonable to expect it. The way to get men to work is to tax them less and let them keep more of what they earn.
Yesterday, we saw near-hysteria on the benches opposite over 'the proposals about spectacles and false teeth. They infuriated hon. Gentlemen opposite, as I can well understand. But the £3½ million that will be saved is mere chicken-feed when set against the problems facing us. Even to get out of debt we require to produce an extra £419 million, yet there is all this furore about £3½ million. We have to save 130 times more than the proposed saving on false teeth and spectacles. I do not know what hon. Gentlemen opposite will say when they have to face reality and we have to do this.
This Finance Bill is quite irrelevant to the problem facing us. It will not help us a bit. I hope that my respects will be passed to the Chancellor, together with the suggestion that, when he has five minutes to spare, he gives himself the pleasure of reading the fourth chapter of the book of Nehemiah. He will find there the boast of the old Jewish prophet:
So built we the wall … for the people had a mind to work.
That was a boast worth making. If the Chancellor could bring the English people to have a mind to work—

Mr. Dempsey: What about the Scots?

Sir C. Osborne: If the Chancellor could bring the British people to have a mind to work and could persuade them to cease living on internal or external charity, we should not need Finance Bills like this. That is why I am so disappointed with it and why it is so inadequate to meet the problems that we face.

9.25 p.m.

Mr. Iain Macleod: My hon. Friend the Member for Louth (Sir C. Osborne) was, on the whole, gloomy in his economic analysis. Although I do not necessarily agree with him in detail, I am afraid that I, too, am gloomy about our economic position. I am sure


that he hopes, as I do, that we will both be proved wrong.
Second Reading of a Finance Bill is often a dull occasion sandwiched between the two major events of the Budget speech and the Budget debate and the Committee stage. Indeed, I have often thought in previous years that it is a day that we might well dispense with. But I think that today has been an excellent day, with speeches from both sides in a low key no doubt, but of real value.
I propose to be brief. This is exempt business, but we are conditioned to voting at about ten o'clock, give or take a few minutes, and I dare say that we can arrange that.
My first point refers to the Chancellor's Budget judgment. The right hon. Gentleman said that I put forward no alternative to the Budget judgment. Perhaps he will allow me to make a small amendment to that. I put forward no alternative to his Budget judgment. I used to join in the game of Budget judgments, for game it is, with the Home Secretary in previous years. But when, as last year, the Chancellor of the Exchequer takes £1,000 million out of the economy with the idea of reducing consumer expenditure and consumer expenditure rises in that same year in money terms by £1,700 million, there is, in my view, little point in arguing whether £340 million, £300 million or £200 million is the precise amount. Touches on the tiller are of little value if there is no rudder on the ship.
Rather than jump about, I should like to concentrate on one subject only, the disallowance of interest, which has played a major part in our discussions.
There is on the Order Paper, if the House is unwise enough to give a Second Reading to the Bill, a Motion in the name of the Chancellor of the Exchequer. Without referring to it, it seems a vast improvement on last year's procedure. It seems an experiment well worth trying, and I hope that the House will agree.
But everything that I have heard today confirms me in the view that the right thing to do with the Clauses about disallowance is to examine them in deep and probing detail upstairs, to find out what give, if any, there be on the part of

the Government, and then to bring them before the House on Report.
The Chancellor's case is largely based on people with large investment incomes running up to 18s. 3d. taxation in the pound, for whom borrowing becomes extremely cheap. We, on this side of the House, say that rather than alter an established principle of income tax law it is vastly better, if that be the right hon. Gentleman's concern, to reduce the levels of personal direct taxation. We intend to return to this in Committee. But it is a revealing figure, given by the Chief Secretary, that surtax accounts for only £5 million and income tax for £20 million of the £25 million estimated to be saved in a full year.
I invite the House to consider some of the points that we would like to hammer out in Committee, and if the Minister of State wishes to answer any of them now so much the better. First, on the question of goodwill, I will quote from a letter from a chartered accountant:
In my profession, together with many others, solicitors, estate agents, etc., it is common practice when entering a partnership to pay monies for goodwill; and invariably these monies are either borrowed as a loan or from a bank, and, of course, repaid out of income earned.
I believe the hon. Member for Heywood and Royton (Mr. Barnett) is quite right. The difficulties that will arise on this do merit a White Paper from the Government, as do other points I will mention. I press that particular point upon the Minister of State and the Government, because there can be no question that very many professions in this country—some of the very best people in this country—are going to be adversely affected by this particular measure.
The second point that arises—and again there is much more detail than I can cover—is agriculture, mentioned by my right hon. Friend the Member for Windsor (Sir C. Mott-Radclyffe). As I understand it, the difficulty is that an agricultural estate is not recognised as a business—although properly normally it is one—and the point one wishes to make is that tax relief should be allowed on interest on borrowings used for the running of an agricultural estate. Secondly, it is often the case, surely, that on a death money is borrowed to pay estate duty


when the only alternative is the fragmentation of the farm or the unit on which estate duty has become liable.
The third case I would like to mention is that of many private companies. We are apt to forget how many private corn-patties there are. There are 9,000 active public companies but 300,000 active unquoted companies; and even if I take those with a sales average exceeding £1 million per annum, there are still 37,500 prominent private companies—four times as many as the number of public companies. I invite a Treasury Minister to go to the very top in this field. Let him go to firms like Pilkington, Sainsbury and others and he will find that the method of personal borrowing they use to finance the future of their great companies is going to be very seriously and adversely affected by this particular proposal; and we will move appropriate Amendments on the Committee stage.
Then there is the question of saving. My hon. Friend the Member for St. Ives (Mr. Nott), in a really excellent speech, said this was—and it is—a blow to the young executives buying a stake in their own company; but it is more than that. There are many, many thousands of people who have borrowed money for excellent purposes through life assurances. They are, after all, borrowing their own money and they are going to be adversely affected by this. I believe this is a betrayal of everything that the Financial Secretary worked out with us on the life assurance Clauses of the Finance Bill a year ago. What the Chancellor has done with this Finance Bill is to introduce one saving scheme and kill 10,000 in the same Bill.
I wish to read extracts from a letter sent to me so that hon. Members opposite can realise that it is not the wealthy they are attacking with this Measure but precisely the kind of people whom they—and for that matter we—need if we wish to form a Government in this country.
The letter says:
I am writing to ask whether you would consider trying to obtain a Clause in the Income Tax Acts to allow income tax relief for interest paid with life insurance policies where the purpose of the loan is to obtain capital for retirement.
The Chancellor's proposal to disallow income tax relief in respect of loan interest paid will over the 13 years 4 months from 6th April, 1970 cost me £962 13s. 4d. … Like many

other lower middle class citizens I am incensed by the unfairness of this.
I am not a rich man, my capital has all been obtained from savings from hard earned in come after bringing up five children. My object in joining the Insurance Scheme was to save for retirement. I shall be over 63 years of age when the loan is repaid.
I have been unable to obtain a building society mortgage on my home because it is not of a high enough standard. It is a 1914 stone built cottage …
If the whole of Britain worked hard, lived frugally, and saved like we do there would be no balance of payments problem."—[Interruption.]
Those are the man's own words. He says that he is lower middle class—that is his phrase, not mine—that he is saving for retirement, and that his cottage is of too poor a standard to obtain a mortgage on it. It is the savings of that sort of man that we should encourage, and not oppose as this measure will do.
The Chief Secretary said today—I think he attributed it to my right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd), although it was myself—that previous Chancellors had looked at this proposal, but if I might quote from the right hon. Member for Battersea, North (Mr. Jay), he said:
I have been recommending every Chancellor of the Exchequer since and including Sir Stafford Cripps to get rid of it."—[OFFICIAL REPORT, 16th April, 1969; Vol. 781, c. 1199.]
Thus every Socialist Chancellor at least has been recommended by the right hon. Gentleman to get rid of this, and they have all refused, until this Chancellor of the Exchequer. We are therefore asked to believe that on the question of Socialist principles, whatever they may be, the present Chancellor is a better guide than Sir Stafford Cripps. We are asked to believe that on the question of equity the present Chancellor is a better guide than Hugh Gaitskell. We are asked to believe that on the political value of those people it will hurt the Chancellor is a better guide than the Home Secretary. We believe that this is not a just but a thoroughly unjust proposal.
I believe that the true criticism of this Finance Bill is the utter lack of consistency between the Chancellor's words and his actions. As my hon. Friend the Member for St. Ives said, there is no strategy at all apparent in this Bill. The Chancellor says that he will press on with the policies of a year ago, but those policies have failed and he dare not carry


out the logic of his own words by taking many millions of £s out of consumer expenditure.
The Chancellor has made one change, and it is an important one. Up to a point it is the change which we have been urging on him and his predecessor for some time. We have urged that he should drop the prices and incomes legislation and concentrate on trade union reform. The Chancellor has at least accepted some of that advice, although if I read the weekend speeches rightly the Government are running away even from the meagre measure of trade union reform they have put before the House.
The Chancellor says that he intends to safeguard the balance of payments. As the hon. Member for Ashton-under-Lyne (Mr. Sheldon) said, the Finance Bill makes no great contribution in that direction, and that is a masterpiece of understatement.
There is not a Clause, there is not a Schedule, there is not a line in this Finance Bill which in any way strengthens our economy, which in any way makes us more competitive. The verdict of this side of the House, which I give without emphasis or even heat is that this Finance Bill, like the Government which spawned it, is a mess, and we are very happy to oppose it.

9.40 p.m.

The Minister of State, Treasury (Mr. Dick Taverne): The right hon. Member for Enfield, West (Mr. Iain Macleod) was clearly touched by some of the criticisms directed at him for not making any Budget judgment this year or last. Last year he did say that the Chancellor had done too much. Clearly, since this was not borne out by events, he regretted this, and refused to make any Budget judgments in the Budget debate this time. He explained this absence of any such judgment by saying that it was impossible to judge demands accurately or exactly.
He is perfectly right in that the indicators available are not altogether reliable or complete. To make no judgment at all on the best available information is a total abrogation of responsibility. It is a decision which no Chancellor could expect to make; it is something which no Chancellor in the past has been able to do.
The hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin) raised a general question of management demand. He asked how the Government intended to use this surplus to repay debt. I say to him, quite frankly, that I cannot give as specific an answer as he would wish. The whole of the surplus will be used to repay debt. As regards the position of the debt repayment, there will be a substantial requirement for sterling to finance the expected improvement in the balance of payments and reserves position. For the rest, the authorities remain determined to sell as much Government debt as possible, net, to the non-banking public so as to enable the maximum repayment to the banking sector.
We have to remember that the Government have to re-finance a substantial volume of maturities this year, partly in the non-banking and partly in the banking sector. It is impossible to predict how this will come out in the year as a whole. We must bear two things in mind. The first is that the large surplus, which the hon. Member correctly said is a surplus of £800 million, would put us in a very much stronger position this year than last, and the second is that many holders of maturing stock will want to replace it with other Government stock.

Hon. Members: Oh.

Mr. Taverne: In a most interesting speech the hon. Member devoted a great deal of time to the need for the simplification of the tax system, and for the discussion of tax changes through, perhaps, a Select Committee dealing with tax questions. He was backed in this by my hon. Friend the Member for Heywood and Royton (Mr. Barnett). I understand that the Select Committee on Procedure will be considering whether a Select Committee on Taxation is the right way to discuss this. That is obviously a suitable body to consider this question.
A word now about simplification. Successive Treasury Ministers have found that some of their high hopes for simplification have been disappointed, that the enormous burden which this carries for the Inland Revenue cannot be overestimated. In 1962 the right hon. and learned Member for Wirral (Mr. Selwyn Lloyd), after expressing his hopes for the simplification of the system, confessed that he had on his arrival at the Treasury


had an "undue optimism about the simpleness of simplification". Further, as the hon. Member will realise, there is some conflict between simplication and equity.
There is another conflict too. The hon. Member said that he had come across many cases of the strongest objections to detailed avoidance provisions. He went on to say that he also found the strongest objections to the discretionary powers left to inspectors. He is riding two horses going in different directions. The one way in which we can avoid detailed anti-avoidance provisions is by having a general anti-avoidance provision, which would place far too wide and general a discretionary power in the hands of Inland Revenue inspectors. I am not, of course, saying that simplification is impossible, and I hope that the hon. Member will welcome the new approach to estate duty contained in the Bill. Here, there is a simplification of a very complex field of the kind which he has demanded. There has been very little criticism of these proposals and I assume that they command general support.
I also hope that my hon. Friend the Member for Heywood and Royton will welcome the issue of a White Paper on the lines for which he asked. I am also glad to know that the right hon. Member for Orkney and Shetland (Mr. Grimond) welcomed the Green Paper on public expenditure, which received an almost ecstatic welcome in The Times Business News. As that paper says, the present Government have done more than any previous Government in the aid of public discussion of matters of public expenditure, economic forecasting and matters in finance and taxation.
I turn to the main criticisms made of the Bill. These related to the selective employment tax and the disallowance of tax relief on personal loans. It is important that these two measures should be judged in the proper context of the Budget strategy. One starts with a judgment about the need to reduce demand and release resources for exports by a certain amount—a judgment which any Chancellor must make. This was discussed in the Budget debate, and this is not the time to judge the total. But, in approaching the way of achieving this aim, it is important for the House to remember the principles which underlie the approach.
These principles are mainly two—first, that the reduction of demand should be done as fairly as possible and in a way which will re-distribute rather than produce regressive measures and, second, that it should be done with as little impact as possible on the cost of living.
Clearly, in the situation which the Chancellor found, it was impossible to avoid altogether the traditional measures of indirect taxation. It has been suggested that demand cannot be reduced and that these measures are ineffective. My hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) said, I believe, that it was impossible to reduce or restrain demand. The evidence is clearly against him on this. If one looks at what happened in the last financial year—

Mr. Sheldon: What I said was that it is impossible to reduce consumption, and what happened last year proves that.

Mr. Taverne: I am happy to rest on what happened last year, and that shows conclusively that the evidence is against my hon. Friend. Of course, last year the reduction in the increase in consumption or the reduction in consumption was not what had been planned. The explanation for this—this has been stated publicly—was that the increase in wages was greater than had been expected and that this offset the Budget measures to a certain extent, but to say that the Budget measures had no effect on consumption is totally misleading—

Mr. Sheldon: I did not say that.

Mr. Taverne: If I misrepresent my hon. Friend, I withdraw that, but for anyone to suggest that the Budget measures had no effect on consumption and did not have a major effect would be totally misleading. Last year consumption rose by only 1·1 per cent. at a time when the gross domestic product increased by 4 per cent. That is clear evidence that, even if the total effect was not as great as had been anticipated, the traditional measures of indirect taxation had a considerable effect on consumer demand and consumption.
I turn to those traditional measures of indirect taxation and I want to make a short reference to the purchase tax changes. The hon. Member for Nelson and Colne (Mr. Waddington) criticised these on a number of grounds. One or


two of the grounds on which he and others criticised the Chancellor was the astonishing ground that the Chancellor should have explained that household textiles meant household textiles. That was made quite clear in the Budget announcement.
The hon. Member said that he is not against the idea of broadening the tax base. The Opposition keep telling us that we must broaden the tax base, but of course it cannot be broadened only by being extended to luxuries. The hon. Member must realise that it is quite impossible to broaden the tax base by confining the extension of purchase tax to luxuries. The right hon. Member for Enfield, West will realise that if one broadened the tax base a number of items would be brought in which cannot be described as luxuries. If one is broadening the indirect tax base, quite clearly the fairest way of doing so is to add items to the field covered by purchase tax, the exclusion of which was in many ways anomalous before.
Secondly, I want to say something about fuel tax. It is sometimes suggested that the motorist is in some ways a separate animal, quite unrelated to the rest of the human species, who must be freed from regulations and free from the taxes the rest of the species bear. If one looks at the question of rise of consumption it is quite clear that the fastest growing section of consumption has been in the rise in consumer expenditure on motoring. In the last decade this has increased by more than three times, and this is at constant prices and disregarding any effect of tax rates. It is therefore reasonable that some of the measures restraining consumer demand should apply in this sector. If so, much the fairest way of doing so is through the fuel tax rather than through licence duties, bearing less hardly on the weekend drivers and those with cheaper cars and more closely related to resources spent on the motorist.
However, the traditional indirect tax measures have three disadvantages. First, they tend to be regressive. Second, they tend by putting up the cost of living to increase the pressure behind wage demands. Thirdly, while it is nonsense to talk about a consumer revolution and

quite clear that in the course of the last year there was no substantial drop in the personal savings ratio, nevertheless there was clearly a danger that a further heavy dose of indirect taxation of the traditional kind would have a diminishing effect. In the context of the Budget strategy therefore one must look at the S.E.T. imposition and at the disallowance of tax relief on overdrafts and personal loans as measures to release resources and restrain consumer spending which do not have the same disadvantages as the traditional indirect tax measures.
The main body of the Opposition attack has, of course, fallen in the past on S.E.T. I shall add a few points to the arguments which were advanced by my right hon. Friend the Chief Secretary. There is no question that as compared with purchase tax the effect of S.E.T. on the cost of living is very much less. This is partly because of the field covered by S.E.T. and partly because some—not all, but some—of S.E.T. has to be absorbed and is not passed on in higher prices.
In addition, the selective employment tax, according to the evidence which is quite clearly available, has a considerable effect on productivity in the tax-bearing sectors. Both in distribution and in construction there has been not only an increase but an acceleration to the trend of rising productivity. There has been a clear reversal of the labour pulls and labour trends in most of the sectors affected by the tax. It is precisely for this cause, precisely because it has less impact on the cost of living because part of it in many sectors has to be absorbed, that there is a sharper outcry about increase in S.E.T. than about any corresponding increase in purchase tax.

Sir Harmar Nicholls: Is not the hon. and learned Gentleman aware that the outcry was because the Government admitted that they had done this not out of merit or fairness but just because it was easy to collect?

Mr. Taverne: The hon. Gentleman is totally unaware of what has been said and what is the fact. It was explained at the start that there were three purposes to S.E.T.—first, the collection of taxes; second, the broadening of the tax


base and an evening of the tax distribution between manufactures and services; and, third, to produce a new pattern in the distribution of labour. It is precisely because there is a resource—releasing effect about S.E.T. that it is a particularly suitable weapon—[Interruption.]

Mr. Speaker: Order. The debate has been placid so far, and there is no reason why it should not continue so.

Mr. Michael Alison: I am grateful to the Minister of State for giving way. He has stated the glittering qualities of the selective employment tax. Will he now tell us the doubts he has about it which led him to ask Professor Reddaway to look into it?

Mr. Taverne: Professor Reddaway was asked over a year ago to report on S.E.T. Since then evidence has become available which made it quite clear that of the weapons available to the Chancellor at the time when he had to take measures against consumption this was one of the most effective in the armoury of the Treasury.
The second part of the proposals which is uncomfortable to hon. Members opposite is the proposed change in relation to tax relief on borrowing. I must say to my hon. Friend the Member for Heywood and Royton that this is not a minor measure concerned with tax avoidance. It is true that when we launched the proposal we were aware of difficulties which would exist in the form in which it was implemented. We shall no doubt hear more of this in Committee, and these matters will be carefully considered. But there is no doubt that viewed in the overall Budget strategy the tax change in relation to borrowing has considerable advantages compared with other measures of restraining consumer spending.
First, it is clearly a sensible corollary to a savings scheme. If there is tax relief on saving it is logical that there should not be tax relief on borrowing for the purpose of spending.
Second, it is reasonable to expect a considerable effect from the disallowance of the tax on consumer spending. One has only to have regard to the total amount of personal loans—[Interruption.]

Mr. Speaker: Order. It is not fair to any speaker that a considerable portion of the House should engage in conversation.

Mr. Taverne: Hon. Members opposite are reluctant to hear about any suggestions which may hit certain sections of the community with which they are more closely connected, and about any tax measure which does not put the whole burden of consumer restraint on the least well-off sections of the community. The first thing hon. Members opposite must realise is the total amount of personal loans affected by the measure. This is likely to be between £700 million and £800 million. The figures of bank advances to the personal sectors, excluding loans for house purchase or professional purposes, total about £600 million. Deducting a part of this for what may be business loans, but adding the considerable figures of loans for credit sales and loans against life policies, one arrives at a total amount of loans and personal overdrafts outstanding which is in the region of £700 to £800 million.
No one expects that all these loans will be liquidated but a considerable fraction will be. In many cases, it will not pay to carry on the overdraft or continue with the personal loan. Some of the liquidation will be by selling investments, and the demand effect of this will be neutral. But it is reasonable to expect a considerable reduction in borrowing to finance consumer expenditure out of the £700 million to £800 million or so affected by the measure.
So here we have a measure which has a considerable effect on consumer demand and which is not regressive but progressive in its effect. By the two criteria by which a Finance Bill must be judged—whether the restraint on demand has a minimum impact on the cost of living, which in this case applies not at all, or whether this is a progressive or regressive way of dealing with the reduction of demand—the selective employment tax and the abolition of tax relief on overdrafts are tested and found sustainable. But it is precisely these measures, which are most eminently suitable for achieving the strategy of the Budget, with their progressive rather than


regressive effect, to which the Opposition object.

Mr. Iain Macleod: The hon. and learned Gentleman must know from his postbag, as I know from mine, that there are a host of questions on the disallowance to which people are anxious to have answers. He has been asked whether he will consider producing a White Paper. Will he deal with that now?

Mr. Taverne: These provisions will be considered fully in Committee. They will be debated there and possibly later on Report. All the points which hon. Members raised then will be fully gone into.

Question put:—

The House divided: Ayes 298, Noes 249.

Division No. 195.]
AYES
[10.2 p.m.


Albu, Austen
Dunwoody, Dr. John (F'th &amp; C'b'e)
Jenkins, Rt. Hn. Roy (Stechford)


Allaun, Frank (Salford, E.)
Eadie, Alex
Johnson, Carol (Lewisham, S.)


Alldritt, Walter
Edelman, Maurice
Jones, Dan (Burnley)


Anderson, Donald
Edwards, Robert (Bilston)
Jones, Rt. Hn. Sir Elwyn (W. Ham, S.)


Archer, Peter
Edwards, William (Merioneth)
Jones, J. Idwal (Wrexham)


Ashley, Jack
Ellis, John
Jones, T. Alec (Rhondda, West)


Ashton, Joe (Bassetlaw)
English, Michael
Judd, Frank


Atkins, Ronald (Preston, N.)
Ennals, David
Kelley, Richard


Atkinson, Norman (Tottenham)
Ensor, David
Kenyon, Clifford


Bacon, Rt. Hn. Alice
Evans, Albert (Islington, S. W.)
Kerr, Mrs. Anne (R'ter &amp; Chatham)


Bagier, Gordon A. T.
Evans, Ioan L. (Birm'h'm, Yardley)
Kerr, Dr. David (W'worth, Central)


Barnes, Michael
Faulds, Andrew
Kerr, Russell (Feltham)


Barnett, Joel
Fernyhough, E.
Lawson, George


Baxter, William
Finch, Harold
Leadbitter, Ted


Beaney, Alan
Fitch, Alan (Wigan)
Lee, Rt. Hn. Frederick (Newton)


Bence, Cyril
Fletcher, Rt. Hn. Sir Eric (Islington, E.)
Lee, Rt. Hn. Jennie (Cannock)


Benn, Rt. Hn. Anthony Wedgwood
Fletcher, Raymond (Ilkeston)
Lee, John (Reading)


Bidwell, Sydney
Fletcher, Ted (Darlington)
Lestor, Miss Joan


Binns, John
Foley, Maurice
Lever, Harold (Cheetham)


Bishop, E. S.
Foot, Michael (Ebbw Vale)
Lever, L. M. (Ardwick)


Blackburn, F.
Ford, Ben
Lewis, Arthur (W. Ham, N.)


Blenkinsop, Arthur
Forrester, John
Lewis, Ron (Carlisle)


Boardman, H. (Leigh)
Fowler, Gerry
Lipton, Marcus


Booth, Albert
Fraser, John (Norwood)
Lomas, Kenneth


Boston, Terence
Freeson, Reginald
Loughlin, Charles


Bottomley, Rt. Hn. Arthur
Galpern, Sir Myer
Luard, Evan


Boyden, James
Gardner, Tony
Lyon, Alexander W. (York)


Bradley, Tom
Ginsburg, David
Lyons, Edward (Bradford, E.)


Bray, Dr. Jeremy
Gordon Walker, Rt. Hn. P. C.
Mahon, Dr. J. Dickson


Brooks, Edwin
Gray, Dr. Hugh (Yarmouth)
McCann, John


Broughton, Dr. A. D. D.
Greenwood, Rt. Hn. Anthony
MacColl, James


Brown, Bob (N'c'tle-upon-Tyne, W.)
Gregory, Arnold
MacDermot, Niall


Brown, R. W. (Shoreditch &amp; F'bury)
Grey, Charles (Durham)
Macdonald, A. H.


Buchan, Norman
Griffiths, David (Rother Valley)
McGuire, Michael


Butler, Herbert (Hackney, C.)
Griffiths, Eddie (Brightside)
McKay, Mrs. Margaret


Butler, Mrs. Joyce (Wood Green)
Griffiths, Will (Exchange)
Mackenzie, Gregor (Rutherglen)


Callaghan, Rt. Hn. James
Gunter, Rt. Hn. R. J.
Mackie, John


Carmichael, Neil
Hamilton, James (Bothwell)
Mackintosh, John P.


Carter-Jones, Lewis
Hamilton, William (Fife, W.)
Maclennan, Robert


Coe, Denis
Hamling, William
MacMillan, Malcolm (Western Isles)


Coleman, Donald
Harper, Joseph
MacPherson, Malcolm


Conlan, Bernard
Hart, Rt. Hn. Judith
Mahon, Peter (Preston, S.)


Corbet, Mrs. Freda
Haseldine, Norman
Mahon, Simon (Bootle)


Craddock, George (Bradford, S.)
Hazell, Bert
Mallalieu, E. L. (Brigg)


Crawshaw, Richard
Healey, Rt. Hn. Denis
Mallaliue, J. P. W. (Huddusfield, E.)


Crosland, Rt. Hn. Anthony
Heffer, Eric S.
Manuel, Archie


Crossman, Rt. Hn. Richard
Henig, Stanley
Mapp, Charles


Darling, Rt. Hn. George
Herbison, Rt. Hn. Margaret
Marks, Kenneth


Davidson, Arthur (Accrington)
Hilton, W. S.
Marquand, David


Davies, Ednyfed Hudson (Conway)
Hobden, Dennis
Marsh, Rt. Hn. Richard


Davies, G. Elfed (Rhondda, E.)
Hooley, Frank
Mason, Rt. Hn. Roy


Davies, Dr. Ernest (Stretford)
Horner, John
Mayhew, Christopher


Davies, Rt. Hn. Harold (Leek)
Houghton, Rt. Hn. Douglas
Mellish, Rt. Hn. Robert


Davies, Ifor (Gower)
Howell, Denis (Small Heath)
Mendelson, John


Davies, S. O. (Merthyr)
Howie, W.
Mikardo, Ian


Delargy, Hugh
Hoy, James
Millan, Bruce


Dell, Edmund
Huckfield, Leslie
Miller, Dr. M. S.


Dempsey, James
Hughes, Rt. Hn. Cledwyn (Anglesey)
Milne, Edward (Blyth)


Diamond, Rt. Hn. John
Hughes, Hector (Aberdeen, N.)
Mitchell, R. C. (S'th'pten, Test)


Dickens, James
Hughes, Roy (Newport)
Molloy, William


Dobson, Ray
Hunter, Adam
Morgan, Elystan (Cardiganshire)


Doig, Peter
Hynd, John
Morris, Alfred (Wythenshawe)


Driberg, Tom
Irvine, Sir Arthur (Edge Hill)
Morris, Charles R. (Openshaw)


Dunn, James A.
Jay, Rt. Hn. Douglas
Morris, John (Aberavon)


Dunnett, Jack
Jeger, George (Goole)
Moyle, Roland


Dunwoody, Mrs. Cwyneth (Exeter)
Jeger, Mrs. Lena (H'b'n &amp; St. P'cras, S.)
Mulley, Rt. Hn. Frederick




Murray, Albert
Reynolds, Rt. Hn. G. W.
Thornton, Ernest


Neal, Harold
Richard, Ivor
Tinn, James


Newens, Stan
Roberts, Albert (Normanton)
Tomney, Frank


Norwood, Christopher
Roberts, Rt. Hn. Goronwy
Tuck, Raphael


Oakes, Gordon
Roberts, Gwilym (Bedfordshire, S.)
Urwin, T. W.


Ogden, Eric
Robertson, John (Paisley)
Varley, Eric G.


O'Malley, Brian
Robinson, Rt. Hn. Kenneth (St. P'c'as)
Wainwright, Edwin (Dearne Valley)


Oram, Albert E.
Rodgers, William (Stockton)
Walden, Brian (All Saints)


Orbach, Maurice
Roebuck, Roy
Walker, Harold (Doncaster)


Orme, Stanley
Rogers, George (Kensington, N.)
Wallace, George


Oswald, Thomas
Rose, Paul
Watkins, David (Consett)


Owen, Dr. David (Plymouth, S'tn)
Ross, Rt. Hn. William
Watkins, Tudor (Brecon &amp; Radnor)


Owen, Will (Morpeth)
Rowlands, E,
Weitzman, David


Page, Derek (King's Lynn)
Ryan, John
Wellbeloved, James


Paget, R. T.
Shaw, Arnold (Ilford, S.)
Wells, William (Walsall, N.)


Palmer, Arthur
Sheldon, Robert
Whitaker, Ben


Pannell, Rt. Hn. Charles
Shinwell, Rt. Hn. E.
White, Mrs. Eirene


Park, Trevor
Shore, Rt. Hn. Peter (Stepney)
Whitlock, William


Parker, John (Dagenham)
Short, Rt. Hn. Edward (N'c'tle-u-Tyne)
Wilkins, W. A.


Parkin, Ben (Paddington, N.)
Short, Mrs. Renée (W'hampton, N. E.)
Willey, Rt, Hn. Frederick


Parkyn, Brian (Bedford)
Silkin, Rt. Hn. John (Deptford)
Williams, Alan (Swansea, W.)


Pavitt, Laurence
Silkin, Hn. S. C. (Dulwich)
Williams, Alan Leo (Hornchurch)


Pearson, Arthur (Pontypridd)
Silverman, Julius
Williams, Clifford (Abertillery)


Peart, Rt. Hn. Fred
Slater, Joseph
Williams, Mrs. Shirley (Hitchin)


Pentland, Norman
Small, William
Williams, W. T. (Warrington)


Perry, Ernest G. (Battersea, S.)
Spriggs, Leslie
Willis, Rt. Hn. George


Perry, George H. (Nottingham, S.)
Steele, Thomas (Dunbartonshire, W.)
Wilson, William (Coventry, S.)


Prentice, Rt. Hn. R. E.
Stewart, Rt. Hn. Michael
Winnick, David


Price, Christopher (Perry Barr)
Stonehouse, Rt. Hn. John
Woof, Robert


Price, Thomas (Westhoughton)
Strauss, Rt. Hn. G. R.
Wyatt, Woodrow


Price, William (Rugby)
Summerskill, Hn. Dr. Shirley



Probert, Arthur
Symonds, J. B.
TELLERS FOR THE AYES:


Pursey, Cmdr. Harry
Taverne, Dick
Mr. Neil McBride and


Rankin, John
Thomas, Rt. Hn. George
Mr. Walter Harrison.


Rees, Merlyn






NOES


Alison, Michael (Barkston Ash)
Crowder, F. P.
Harris, Frederic (Croydon, N. W.)


Allason, James (Hemel Hempstead)
Cunningham, Sir Knox
Harris, Reader (Heston)


Amery, Rt. Hn. Julian
Currie, G. B. H.
Harrison, Col. Sir Harwood (Eye)


Astor, John
Dalkeith, Earl of
Harvey, Sir Arthur Vere


Atkins, Humphrey (M't'n &amp; M'd'n)
Dance, Jamos
Harvie Anderson, Miss


Awdry, Daniel
Davidson, James (Aberdeenshire, W.)
Hastings, Stephen


Baker, Kenneth (Acton)
d-Avigdor-Goldsmid, Sir Henry
Hawkins, Paul


Baker, W. H. K. (Banff)
Deedes, Rt. Hn. W. F. (Ashford)
Hay, John


Balniel, Lord
Digby, Simon Wingfield
Heald, Rt. Hon. Sir Lionel


Barber, Rt. Hn. Anthony
Dodds-Parker, Douglas
Heath, Rt. Hn. Edward


Batsford, Brian
Donnelly, Desmond
Heseltine, Michael


Beamish, Col. Sir Tufton
Doughty, Charles
Higgins, Terence L.


Bell, Ronald
Douglas-Home, Rt. Hn. Sir Alec
Hiley, Joseph


Bennett, Sir Frederic (Torquay)
Drayson, G. B.
Hill, J. E. B.


Bennett, Dr. Reginald (Gos. &amp; Fhm)
du Cann, Rt. Hn. Edward
Hirst, Geoffrey


Berry, Hn. Anthony
Eden, Sir John
Hogg, Rt. Hn. Quintin


Bessell, Peter
Elliot, Capt. Walter (Carshalton)
Holland, Philip


Biggs-Davison, John
Emery, Peter
Hordern, Peter


Birch, Rt. Hn. Nigel
Errington, Sir Eric
Hornby, Richard


Black, Sir Cyril
Evans, Gwynfor (C'marthen)
Howell, David (Guildford)


Blaker, Peter
Eyre, Reginald
Hunt, John


Body, Richard
Farr, John
Hutchison, Michael Clark


Boyd-Carpenter, Rt. Hn. John
Fisher, Nigel
Iremonger, T. L.


Boyle, Rt. Hn. Sir Edward
Foster, Sir John
Irvine, Bryant Godman (Rye)


Braine, Bernard
Fraser, Rt. Hn. Hugh (St'fford &amp; Stone)
Jenkin, Patrick (Woodford)


Brewis, John
Galbraith, Hn. T. G.
Jennings, J. C. (Burton)


Brinton, Sir Tatton
Gilmour, Ian (Norfolk, C)
Johnson Smith, G. (E. Grinstead)


Bromley-Davenport, Lt.-Col. Sir Walter
Gilmour, Sir John (Fife, E.)
Johnston, Russell (Inverness)


Brown, Sir Edward (Bath)
Glover, Sir Douglas
Jones, Arthur (Northants, S.)


Bruce-Gardyne, J.
Glyn, Sir Richard
Jopling, Michael


Buchanan-Smith, Alick (Angus, N &amp; M)
Godber, Rt. Hn. J. B.
Joseph, Rt. Hn. Sir Keith


Buck, Antony (Colchester)
Goodhart, Philip
Kaberry, Sir Donald


Bullus, Sir Eric
Goodhew, Victor
Kerby, Capt. Henry


Burden, F. A.
Gower, Raymond
Kershaw, Anthony


Campbell, B. (Oldham, W.)
Grant, Anthony
Kimball, Marcus


Campbell, Gordon (Moray &amp; Nairn)
Grant-Ferris, R.
King, Evelyn (Dorset, S.)


Carlisle, Mark
Gresham Cooke, R.
Kirk, Peter


Channon, H. P. G.
Grieve, Percy
Kitson, Timothy


Chichester-Clark, R.
Griffiths, Eldon (Bury St. Edmunds)
Knight, Mrs. Jill


Clark, Henry
Grimond, Rt. Hn, J.
Lambton, Viscount


Clegg, Walter
Gurden, Harold
Lancaster, Col. C. G.


Cooper-Key, Sir Neill
Hall, John (Wycombe)
Lane, David


Costain, A. P.
Hall-Davis, A. G. F.
Langford-Holt, Sir John


Craddock, Sir Beresford (Spelthorne)
Hamilton, Lord (Fermanagh)
Legge-Bourke, Sir Harry


Crouch, David
Hamilton, Michael (Salisbury)
Lewis, Kenneth (Rutland)







Lloyd, Rt. Hn. Geoffrey (Sut'nC'dfield)
Osborn, John (Hallam)
Steel, David (Roxburgh)


Longden, Gilbert
Osborne, Sir Cyril (Louth)
Stodart, Anthony


Lubbock, Eric
Page, Graham (Crosby)
Stoddart-Scott, Col. Sir M.


MacArthur, Ian
Page, John (Harrow, W.)
Summers, Sir Spencer


Mackenzie, Alasdair (Ross &amp; Crom'ty)
Pardoe, John
Tapsell, Peter


Maclean, Sir Fitzroy
Pearson, Sir Frank (Clitheroe)
Taylor, Sir Charles (Eastbourne)


Macleod, Rt. Hn. Iain
Peel, John
Taylor, Edward M. (G'gow, Cathcart)


McMaster, Stanley
Percival, Ian
Temple, John M.


Macmillan, Maurice (Farnham)
Peyton, John
Thatcher, Mrs. Margaret


McNair-Wilson, Michael
Pike, Miss Mervyn
Thorpe, Rt. Hn. Jeremy



Pink, R. Bonner
Tilney, John


McNair-Wilson, Patrick (New Forest)
Pounder, Rafton
Turton, Rt. Hn. R. H.


Maddan, Martin
Powell, Rt, Hn. J. Enoch
van Straubenzee, W. R.


Maginnis, John E.
Price, David (Eastleigh)
Vaughan-Morgan, Rt, Hn. Sir John


Marples, Rt. Hn. Ernest
Prior, J. M. L.
Vickers, Dame Joan


Marten, Neil
Pym, Francis
Waddington, David


Maude, Angus
Quennell, Miss J. M.
Wainwright, Richard (Colne Valley)


Maudling, Rt. Hn. Reginald
Ramsden, Rt. Hn. James
Walker, Peter (Worcester)


Mawby, Ray
Rawlinson, Rt. Hn. Sir Peter



Maxwell-Hyslop, R. J.
Rees-Davies, W. R.
Walker-Smith, Rt. Hn. Sir Derek


Maydon, Lt.-Cmdr. S. L. C.
Renton, Rt. Hn. Sir David
Wall, Patrick


Mills, Peter (Torrington)
Rhys Williams, Sir Brandon
Walters, Dennis


Mills, Stratton (Belfast, N.)
Ridley, Hn. Nicholas
Ward, Dame Irene


Miscampbell, Norman
Ridsdale, Julian
Weatherill, Bernard


Mitchell, David (Basingstoke)
Rippon, Rt. Hn. Geoffrey
Wells, John (Maidstone)


Monro, Hector
Robson Brown, Sir William
Wiggin, A. W.


Morgan, Geraint (Denbigh)
Rodgers, Sir John (Sevenoaks)
Williams, Donald (Dudley)


Morgan-Giles, Rear-Adm.
Rossi, Hugh (Hornsey)
Wilson, Geoffrey (Truro)


Morrison, Charles (Devizes)
Royle, Anthony
Winstanley, Dr. M. P.


Mott-Radclyffe. Sir Charles
Russell, Sir Ronald
Wolrige-Gordon, Patrick


Munro-Lucas-Tooth, Sir Hugh
St. John-Stevas, Norman
Wood, Rt. Hn. Richard


Murton, Oscar
Sandys, Rt. Hn. D.
Woodnutt, Mark


Nabarro, Sir Gerald
Scott, Nicholas
Worsley, Marcus


Neave, Airey
Scott-Hopkins, James
Wright, Esmond


Nicholls, Sir Harmar
Sharples, Richard
Wylie, N. R.


Noble, Rt. Hn. Michael
Shaw, Michael (Sc'b'gh &amp; Whitby)
Younger, Hn. George


Nott, John
Silvester, Frederick



Onslow, Cranley
Sinclair, Sir George
TELLERS FOR THE NOES:


Orr, Capt. L. P. S.
Smith, John (London &amp; W'minster)
Mr. R. W. Elliott and


Orr-Ewing, Sir Ian
Stainton, Keith
Mr. Jasper More.


Bill accordingly read a Second time.

FINANCE BILL

Motion made, and Question proposed,
That the following provisions of the Bill, namely, Clauses 7, 8, 36, 38, 43 and 44 and Schedule 6, be committed to a Committee of the whole House; that the remainder of the Bill be committed to a Standing Committee; and that, when the provisions of the Bill considered respectively by the Committee of the whole House and by the Standing Committee have been reported to the House, the Bill be proceeded with as if the Bill had been reported as a whole to the House from the Standing Committee.—[Mr. Diamond.]

10.15 p.m.

Mr. Peter Kirk: On a point of order. I raised with you this afternoon, Mr. Speaker, the question whether it will be in order to proceed with the Motion. In view of the fact that the Motion is incomprehensible to hon. Members unless they have copies of the Bill in front of them, I have inquired at the Vote Office whether copies of the Bill are available. There is one copy in the Library, but it is impossible to bring it into the House. We cannot possibly follow the intricacies of the Motion unless we have copies of the Bill in front of us. I therefore ask you, Mr. Speaker, whether it is possible to proceed with the Motion tonight?

Mr. Speaker: Order. I invited the hon. Gentleman to raise this point at this moment. The fact is that this is a procedural Motion. It cannot be amended. It can be voted on for or against. There can be only a brief speech in support of it and a brief speech against. It should have been possible by now for any hon. Member who wished to decide whether he would vote for or against to see from a copy of the Bill what Clauses were involved.

Mr. John Hay: On a point of order—

Mr. Speaker: Order. We have had a good run of points of order about the non-appearance of the Bill.

Mr. Hay: If I understood what you have said, Mr. Speaker, it is that we are not in order in debating this Motion, except for a brief speech in support of the Motion and a brief speech against, if any hon. Member wishes to speak. I wish to ask a question relating to new

Clauses. Am I to take it from your Ruling that we are not allowed to speak to this Motion.

Mr. Speaker: I abide by Standing Order No. 40(3)
If such a Motion is opposed, Mr. Speaker after permitting, if he thinks fit"—
and he does think fit—
a brief explanatory statement from the Member who makes and from a Member who opposes the Motion shall, without permitting any further debate, put the question thereon.
I am afraid that the hon. Gentleman cannot ask questions.

Sir Gerald Nabarro: On a point of order—[Interruption.]

Mr. Speaker: Order. Noise must not prevent an hon. Gentleman putting a point of order. Sir Gerald Nabarro.

Sir G. Nabarro: You will recall, Mr. Speaker, that this is the first time a Motion has been allowed before this House for part of the Finance Bill only to be sent upstairs and the remainder to be taken on the Floor of the House. Last year the whole of the Finance Bill was sent upstairs to a Committee, not a part of it. This evening the procedural Motion involves certain Clauses being taken on the Floor of the House—

Mr. Speaker: The hon. Gentleman cannot, by anticipation, debate that procedural Motion. He must come to his point of order.

Sir G. Nabarro: I hope to be brief. I wish to put to you that there are certain Clauses, and in my own case only two Clauses, which I felt—

Mr. Speaker: Order. I am sorry but the hon. Gentleman cannot put that to the Chair.

Mr. John Pardoe: rose—

Sir G. Nabarro: rose—

Mr. Speaker: Order. I have ruled on the hon. Gentleman's submission.

Sir G. Nabarro: rose—

Mr. Speaker: Order.

Sir G. Nabarro: I have not put it yet.

Mr. Speaker: The hon. Gentleman might wish that certain Clauses in the Motion were not in, or that certain Clauses which are not in the Motion were in. He cannot debate that either as a point of order or in any other way at this stage.

Sir G. Nabarro: I wanted to complete my point of order. I merely wished to ask you, Mr. Speaker, how it is possible in these circumstances for a back-bench Member of this House to move that certain Clauses which the Government wish taken upstairs should be taken downstairs. I am asking for your Ruling, for the protection of private Members, who are a minority. I do not wish to submit to the dictatorial methods of the Chancellor of the Exchequer.

Mr. Speaker: Order. I have already answered the hon. Member's point of order. He has no way of varying the procedural Motion. If he does not like it he can vote against it. Mr. Pardoe, to raise a point of order.

Mr. Pardoe: It is not a point of order. I wish to make a short speech against the Motion. Am I in order?

Mr. Speaker: Order. The hon. Member is a little too eager. I have not yet put the Question.

Mr. John Peyton: On a point of order, Mr. Speaker. May I ask for guidance about the future? We are being asked to vote on a procedural Motion which names certain Clauses of a Bill which is not currently before us. This puts the House in a very difficult position indeed. I think that you, Mr. Speaker, are aware of a tendency today for the Executive to humiliate the House of Commons—[Interruption.]

Mr. Speaker: Order. I do not want to hear noise from supporters of the Executive.

Mr. Peyton: In these circumstances, while acknowledging the undoubted difficulty of your position, we find ourselves unable to look anywhere for support and for protection, save to you, Mr. Speaker.

Mr. Speaker: Order. I have already ruled, in answer to a similar point of order from the hon. Member for Worcestershire, South (Sir G. Nabarro), on the point that the hon. Member has raised.
If he wants to change the procedure, he can do so only by changing Standing Order No. 40, and he cannot change it tonight.

Mr. Geoffrey Hirst: Further to that point of order. I think that every hon. Member recognises your difficult position, Mr. Speaker. We all respect the fact that we, as back benchers, cannot change a procedural Motion under the Standing Orders of the House. We feel very strongly about this and we are asking for the protection of the Chair in this unusual situation. We cannot change a procedural Motion, but you, Mr. Speaker, have an authority, which is quite separate, to protect back benchers. We are asked to pass a procedural Motion on facts and figures and details, many of which are not complete, Schedules which touch only some of the Clauses, and Clauses which do not touch the Schedules. It is not right and it is not fair to the electorate.

Mr. Speaker: Order. This is not a new procedure. The House may from time to time decide about a Bill that some of its Clauses should be taken upstairs and some on the Floor of the House. When such a Motion is made by the right hon. or hon. Member in charge of a Bill, one brief speech may be made in favour of it and one against, and the House must then decide.

10.24 p.m.

The Chief Secretary to the Treasury (Mr. John Diamond): It is hoped that it will suit the convenience of the House to draw this reasonable compromise or dividing line between having the whole of the Committee stage downstairs, in which case a great deal of the time of this Chamber would be taken up with a mass of detailed and technical points, which many right hon. and hon. Members think would be excessive, and the alternative of sending it all upstairs, in which case many right hon. and hon. Members would be denied the opportunity of making contributions on matters which they regard as important. It is, therefore, proposed that on the Clauses mentioned the Bill should be remitted to a Committee of this Chamber. These are Clauses 7 and 8, in respect of income tax and surtax, Clauses 36 and 38, dealing with betterment levy, Clauses 43 and 44 dealing with selective employment tax and selective employment payments, and Schedule


6 dealing with the extension of purchase tax.
I would hope that the Motion would find support all over the House. Those who vote against it will be voting for sending the whole Bill upstairs.

Mr. Pardoe: rose—

Mr. John Smith: rose—

Mr. Speaker: Order. The hon. Member for Cornwall, North (Mr. Pardoe) must restrain his eagerness.

10.26 p.m.

Mr. John Smith: I oppose the Motion. The Chief Secretary spoke of the convenience of the House, but there are more important things than the convenience of the House. This is the most important Bill of the year, and it affects all the constituents of every hon. Member. On Finance Bills of all Bills, backbenchers often wish to speak, and even vote, differently from their Front Bench spokesmen.

Hon. Members: Oh.

Mr. Speaker: Order. Elementary truisms ought not to cause such a shock.

Mr. Smith: I shall become much more subtle and sophisticated in a moment, Mr. Speaker.
Until the year before last about 175 Members took part in the Committee stage of the Finance Bill, and in the nature of things they were mainly from the Opposition, of whatever party. Suppose about 125 of the Members who took part have been Opposition Members; then if one removes from that number some Opposition Whips, some Opposition Front Bench spokesmen and some Opposition crypto-Front Bench spokesmen, one is reduced to a number of perhaps 120 bona fide card-carrying Conservatives who have habitually taken part in the Committee stage of Finance Bills.
But this year we are to have, I understand, a Committee of 30, of which perhaps 12 will be Opposition Members. They will consist of a Whip, three Front Bench spokesmen and four crypto-Front Bench spokesmen in the shape of the officers of our party finance committee, and we shall be left with not 120 Opposition back benchers but four.
What are the reasons advanced for this?

Mr. Speaker: Order. The speech must be a brief one.

Mr. Smith: The first reason was that it would save time. But throughout the Report and the evidence submitted to the Select Committee on Procedure it was stated that splitting the Bill would not save time, and I leave that argument.
The next argument was that specialist Clauses can best be dealt with by specialists upstairs. No division of the Bill could leave simply specialist stuff to go upstairs. A cursory examination of the Bill by those who are lucky enough, like yourself, Mr. Speaker, to have obtained one, will show that many of the Clauses going upstairs are of wide interest, and that some of them are party political matters.
But even if it is only specialist stuff that goes upstairs, as the Chief Secretary to the Treasury submitted in his memorandum to the Select Committee on Procedure in January, 1967:
Even the most technical 'administrative' provisions can make a substantial difference to the tax liability of individuals.
Moreover, some of the specialist stuff none of us fully understands, whether it is taken upstairs or downstairs. No matter where it is discussed, we shall have the spectacle of two Front Bench spokesmen speaking from briefs while the people who understand it are separated at opposite ends of the Chamber biting their nails with anxiety.

Mr. A. Woodburn: On a point of order—

Mr. Marcus Lipton: Leave him alone.

Mr. Woodburn: So far as I can understand—[Interruption.]

Mr. Speaker: Order. I thought we all believed in the preciousness of Parliament. Noise does not help.

Mr. Woodburn: I gather that the hon. Member is not speaking against sending the Bill upstairs, but is asking that the whole of the Bill should be sent upstairs. The Chief Secretary said that to oppose the Motion meant wishing the whole Bill to go upstairs. May I seek


your guidance, Mr. Speaker? Is the effect of voting against the Motion to send the whole Bill upstairs?

Mr. Speaker: That is not a point of order. It is not the duty of Mr. Speaker to guide hon. Members as to what a Motion means. It is their job to find out. Mr. Smith, briefly. I must remind the hon. Member that I have already once asked him to be brief. He must come to a conclusion soon.

Mr. Smith: I will be brief, but most of my speech so far has been made by the House as a form of Soviet and not by me singly.
I was saying that if specialists are to be found, surely they are more likely to be found if they are drawn from a wide circle rather than if they are drawn from a narrow circle.
Now this is my final point. The real reason for splitting the Bill in this way is to suit us, to suit our convenience. The then Leader of the House said on 6th December 1967:
backbenchers also constantly complain that they want more time for the kind of debates which interest them …".
What about our constituents? Taxation interests them.
The right hon. Gentleman also said—

Mr. Speaker: Order. We cannot have any more quotations. The hon. Member must come to the end of his speech.

Mr. Smith: This is my final point. The right hon. Gentleman also said that
the good of the other back benchers—the vast majority, after all—who do not attend, can also be achieved by relieving them of the tedium of the Committee stage on the Floor of the House."—[OFFICIAL REPORT, 6th December, 1967; Vol. 755, c. 1450.]

Some back benchers may like to be relieved of the tedium, but the taxpayers, our constituents, also find it tedious to be relieved of their money. I think they like to feel that we take the matter seriously.

Splitting the Bill gives us the worst of all worlds. It turns the parts taken down here into generalised debates. Upstairs it cuts up the natural divisions of taxation, which is into families of taxes it picks the eyes out of each part of the Bill. There is no Re-committal stage, and therefore the Report stage is simply a ritual—a series of Press statements made by back benchers. [Interruption.]

Mr. Speaker: Order. When Mr. Speaker has asked an hon. Member to be brief, it is not in order for hon. Members to encourage an hon. Member to disobey Mr. Speaker. Mr. John Smith.

Sir Knox Cunningham: On a point of order, Mr. Speaker. Would you tell the House what authority you have to silence an hon. Member in respect of the length of his speech when he is on his feet?

Mr. Speaker: Order. Under Standing Order No. 40(3), which says:
… Mr. Speaker after permitting, if he thinks fit, a brief explanatory statement from the Member who makes and from a Member who opposes the motion shall, without permitting any further debate, put the question thereon.

Mr. Smith: Splitting the Bill does not save time. It does not improve consideration of the Bill. It simply muzzles discussion, in order, at best, to save from tedium, and to pander to, those irresponsible Members of the House who think that all gold is fairy gold and that spending money is a full-time job.

Question put:—

The House divided: Ayes 261, Noes 17.

Division No. 196.]
AYES
[10.40 p.m.


Albu, Austen
Beaney, Alan
Bray, Dr. Jeremy


Allaun, Frank (Salford, E.)
Bence, Cyril
Brooks, Edwin


Alldritt, Walter
Benn, Rt. Hn. Anthony Wedgwood
Broughton, Dr. A. D. D.


Anderson, Donald
Bidwell, Sydney
Brown, Bob (N'c'tle-upon-Tyne, W.)


Archer, Peter
Binns, John
Brown, R. w. (Shoreditch &amp; F'bury)


Ashley, Jack
Bishop, E. S.
Buchan, Norman


Ashton, Joe (Bassetlaw)
Blackburn, F.
Butler, Mrs. Joyce (Wood Green)


Atkins, Ronald (Preston, N.)
Blenkinsop, Arthur
Callaghan, Rt. Hn. James


Atkinson, Norman (Tottenham)
Boardman, H. (Leigh)
Carmichael, Neil


Bagier, Gordon A. T.
Booth, Albert
Carter-Jones, Lewis


Barnes, Michael
Bottomley, Rt. Hn. Arthur
Coe, Denis


Barnett, Joel
Boyden, James
Coleman, Donald


Baxter, William
Bradley, Tom
Conlan, Bernard




Corbet, Mrs. Freda
Irvine, Sir Arthur (Edge Hill)
Pannell, Rt. Hn. Charles


Craddock, George (Bradford, S.)
Jeger, Mrs. Lena (H'b'n &amp; St. P'cras, S.)
Park, Trevor


Crawshaw, Richard
Jenkin, Patrick (Woodford)
Parker, John (Dagenham)


Crosland, Rt. Hn. Anthony
Jenkins, Rt. Hn. Roy (Stechford)
Parkyn, Brian (Bedford)


Davidson, Arthur (Accrington)
Jones, Dan (Burnley)
Pavitt, Laurence


Davies, Edynfed Hudson (Conway)
Jones, Rt. Hn. Sir Elwyn (W. Ham, S.)
Pearson, Arthur (Pontypridd)


Davies, G. Elfed (Rhondda, E.)
Jones, J. Idwal (Wrexham)
Peart, Rt. Hn. Fred


Davies, Dr. Ernest (Stretford)
Jones, T. Alec (Rhondda, West)
Pentland, Norman


Davies, Rt. Hn. Harold (Leek)
Judd, Frank
Perry, Ernest G. (Battersea, S.)


Davies, Ifor (Gower)
Kenyon, Clifford
Perry, George H. (Nottingham, S.)


Davies, S. O. (Merthyr)
Kerr, Mrs. Anne (R'ter &amp; Chatham)
Prentice, Rt. Hn. R. E.


Delargy, Hugh
Kerr, Dr. David (W'worth, Central)
Price, Christopher (Perry Barr)


Dell, Edmund
Kerr, Russell (Feltham)
price, Thomas (Westhoughton)


Diamond, Rt. Hn. John
Lawson, George
Probert, Arthur


Dickens, James
Leadbitter, Ted
Rees, Merlyn


Dobson, Ray
Lee, Rt. Hn. Frederick (Newton)
Richard, Ivor


Doig, Peter
Lee, John (Reading)
Roberts, Albert (Normanton)


Driberg, Tom
Lestor, Miss Joan
Roberts, Rt. Hn. Goronwy


Dunn, James A.
Lever, Harold (Cheetham)
Roberts, Gwilym (Bedfordshire, S.)


Dunnett, Jack
Lever, L. M. (Ardwlck)
Robertson, John (Paisley)


Dunwoody, Mrs. Gwyneth (Exeter)
Lewis, Arthur (W. Ham, N.)
Robinson, Rt. Hn. Kenneth (St. P'c'as)


Dunwoody, Dr. John (F'th &amp; C'b'e)
Lewis, Ron (Carlisle)
Rodgers, William (Stockton)


Eadie, Alex
Lipton, Marcus
Roebuck, Roy


Edelman, Maurice
Lomas, Kenneth
Rose, Paul


Edwards, William (Merioneth)
Loughlin, Charles
Ross, Rt. Hn. William


Ellis, John
Luard, Evan
Rowlands, E.


Ennals, David
Lyon, Alexander W. (York)
Shaw, Arnold (Ilford, S.)


Ensor, David
Lyons, Edward (Bradford, E.)
Sheldon, Robert


Faulds, Andrew

Shore, Rt. Hn. Peter (Stepney)


Fernyhough, E.
Mabon, Dr. J. Dickson
Short, Rt. Hn. Edward (N'c'tle-u-Tyne)


Finch, Harold
McBride, Neil
Short, Mrs. Renée (W'hampton, N. E.)


Fitch, Alan (Wigan)
McCann, John
Silkin, Hn. S. C. (Dulwich)


Fletcher, Rt. Hn. Sir Eric (Islington, E.)
MacDermot, Niall
Silverman, Julius


Fletcher, Raymond (Ilkeston)
Macdonald, A. H.
Slater, Joseph


Fletcher, Ted (Darlington)
McGuire, Michael
Small, William


Foot, Michael (Ebbw Vale)
McKay, Mrs. Margaret
Spriggs, Leslie


Ford, Ben
Mackenzie, Gregor (Rutherglen)
Stewart, Rt. Hn. Michael


Forrester, John
Mackie, John
Stonehouse, Rt. Hn. John


Fowler, Gerry
Mackintosh, John P.
Strauss, Rt. Hn. G. R.


Fraser, John (Norwood)
Maclennan, Robert
Summerskill, Hn. Dr. Shirley


Freeson, Reginald
Macleod, Rt. Hn. Iain
Symonds, J. B.


Galpern, Sir Myer
Mahon, Peter (Preston, S.)
Taverne, Dick


Gardner, Tony
Mahon, Simon (Bootle)
Thomas, Rt. Hn. George


Garrett, W. E.
Mallalieu, E. L. (Brigg)
Thornton, Ernest


Gordon Walker, Rt. Hn. P. C.
Mallalieu, J. P. W. (Huddersfield, E.)
Tinn, James


Gray, Dr. Hugh (Yarmouth)
Manuel, Archie
Urwin, T. W.


Gregory, Arnold
Mapp, Charles
Varley, Eric G.


Grey, Charles (Durham)
Marks, Kenneth
Wainwright, Edwin (Dearne Valley)


Griffiths, Eddie (Brightside)
Marquand, David
Walden, Brian (All Saints)


Griffiths, Will (Exchange)
Mason, Rt. Hn. Roy
Walker, Harold (Doncaster)


Gunter, Rt. Hn. R. J.
Mellish, Rt. Hn. Robert
Wallace, George


Hamilton, James (Bothwell)
Mendelson, John
Watkins, David (Consett)


Hamilton, William (Fife, W.)
Mikardo, Ian
Watkins, Tudor (Brecon &amp; Radnor)


Harper, Joseph
Millan, Bruce
Weitzman, David


Harrison, Walter (Wakefield)
Miller, Dr. M. S.
Wellbeloved, James


Haseldine, Norman
Milne, Edward (Blyth)
Wells, William (Walsall, N.)


Hattersley, Roy
Mitchell, R. C. (S'th'pton, Test)
Whitaker, Ben


Hazell, Bert
Molloy, William
White, Mrs. Eirene


Healey, Rt. Hn. Denis
Morgan, Elystan (Cardiganshire)
Whitlock, William


Heffer, Eric S.
Morris, Alfred (Wythenshawe)
Willkins, W. A.


Henig, Stanley
Morris, John (Aberavon)
Williams, Alan (Swansea, W.)


Herbison, Rt. Hn. Margaret
Moyle, Roland
Williams, Alan Lee (Hornchurch)


Higgins, Terence L.
Mulley, Rt. Hn. Frederick
Williams, Clifford (Abertillery)


Hobden, Dennis
Murray, Albert
Williams, Mrs. Shirley (Hitchin)


Hooley, Frank
Neal, Harold
Williams, W. T. (Warrington)


Horner, John
Newens, Stan
Willis, Rt. Hn. George


Houghton, Rt. Hn. Douglas
Oakes, Gordon
Wilson, William (Coventry, S.)


Howell, Denis (Small Heath)
Ogden, Eric
Winnick, David


Howie, W.
O'Malley, Brian
Woodburn, Rt. Hn. A.


Hoy, James
Oram, Albert E.
Woof, Robert


Huckfield, Leslie
Orbach, Maurice
Wyatt, Woodrow


Hughes, Rt. Hn. Cledwyn (Anglesey)
Orme, Stanley



Hughes, Hector (Aberdeen, N.)
Oswald, Thomas
TELLERS FOR THE AYES:


Hughes, Roy (Newport)
Owen, Dr. David (Plymouth, S'tn)
Mr. Charles B. Morris and


Hunter, Adam
Page, Derek (King's Lynn)
Mr. Ioan L. Evans.


Hynd, John
Palmer, Arthur





NOES


Bessell, Peter
Grimond, Rt. Hn. J.
Mackenzie, Alasdair (Ross &amp; Crom'ty)


Bullus, Sir Eric
Hastings, Stephen
Orr, Capt. L. P. S.


Crowder, F. P.
Hirst, Geoffrey
Peyton, John


Davidson, James (Aberdeenshire, W.)
Johnston, Russell (Inverness)
Rees-Davies, W. R.







Smith, John (London &amp; W'minster)
Wainwright, Richard (Colne Valley)
TELLERS FOR THE NOES


Steel, David (Roxburgh)
Winstanley, Dr. M. P.
Mr. Eric Lubbock and


Thorpe, Rt. Hn. Jeremy

Mr. John Pardoe

Ordered,
That the following provisions of the Bill, namely, Clauses 7, 8, 36, 38, 43 and 44 and Schedule 6, be committed to a Committee of the whole House; that the remainder of the Bill be committed to a Standing Committee; and that, when the provisions of the Bill considered respectively by the Committee of the whole House and by the Standing Committee have been reported to the House, the Bill be proceeded with as if the Bill had been reported as a whole to the House from the Standing Committee.

Committee Tomorrow.

INCOME TAX

10.50 p.m.

The Financial Secretary to the Treasury (Mr. Harold Lever): I beg to move:
That an humble Address be presented to Her Majesty, praying that, on the ratification by Japan of the Convention set out in the Schedule to the Order entitled the Double Taxation Relief (Taxes on Income) (Japan) Order 1969, a draft of which was laid before this House on 15th April, an Order be made in the form of that draft.
We have two double taxation relief Orders to bring before the House, and it may be convenient to discuss them together. These fascinating and interesting double taxation Orders relate to Japan and Norway. I shall be brief in dealing with them because I know that hon. Members have—

Mr. Deputy Speaker (Mr. Harry Gourlay): Order. I presume that it is the wish of the House to discuss the Orders together?

Mr. Patrick Jenkin: That will be agreeable to this side of the House.

Mr. Lever: I know that the House will forgive me for being exceptionally brief because I know that great numbers of hon. Members have an immense and deep passion for such Orders and have studied them closely and a detailed elucidation by me will not be required. The first Order, dealing with Japan, replaces a Convention signed in 1962 by a new Convention which follows the general pattern of recent Conventions. I think the House is familiar with the terms of that pattern.
The new Convention concerned with Norway also follows the pattern of recent

Conventions, and again I do not propose to go into a detailed summary of its provisions because the House will have made itself familiar with the considerable details of the Order. I trust that these two Orders will commend themselves to the House.

Question put and agreed to.

Resolved,
That an humble Address be presented to Her Majesty, praying that, on the ratification by Japan of the Convention set out in the Schedule to the Order entitled the Double Taxation Relief (Taxes on Income) (Japan) Order 1969, a draft of which was laid before this House on 15th April, an Order be made in the form of that draft.

To be presented by Privy Councillors or Members of Her Majesty's Household.

Resolved,
That an humble Address be presented to Her Majesty, praying that, on the ratification by the Government of the Kingdom of Norway of the Convention set out in the Schedule to the Order entitled the Double Taxation Relief (Taxes on Income) (Norway) Order 1969, a draft of which was laid before this House on 15th April, an Order may be made in the form of that draft.—[Mr. Harold Lever.]

To be presented by Privy Councillors or Members of Her Majesty's Household.

Mr. Lever: I beg to move,
That the Central Banks (Income Tax Schedule C Exemption) Order 1969, a draft of which was laid before this House on 15th April, be approved.
This Motion has a similar advantage to that of the two former ones. It relates to an Order which I am sure hon. Members will have already studied in great detail. It seeks approval for a draft Order under Section 22 of the 1957 Finance Act. It gives exemption from English taxation to the Bank of Negara, Malaysia, which is the central bank of Malaysia. Now that the bank has been entrusted with the reserves of Malaysia, it qualifies for joining the select band of individuals who enjoy exemption from income tax. I do not think hon. Members will want me to go into great detail, although I am willing to do so if I am asked.

Question put and agreed to.

SUNDAY ENTERTAINMENTS [MONEY]

Queen's Recommendation having been signified—

Motion made, and Question proposed,
That, for the purposes of any Act of the present Session to make, in place of certain statutory provisions relating to Sunday observance and the playing of games, provision, in relation to Sunday, for preventing payments being made in certain circumstances in the case of certain spectacles taking place during certain hours, it is expedient to authorise the payment out of moneys provided by Parliament of any increase in the sums payable out of moneys so provided in respect of rate support grants to local authorities in England and Wales which may arise from the inclusion, in the expenditure relevant to the fixing of the aggregate amount of those grants, of expenses incurred under the said Act of the present Session by a local authority in Wales or Monmouthshire in connection with the holding of a local poll to determine either whether sports and games where payment is made by spectators should be allowed in the area of the authority after a specified time on Sundays or whether public entertainments and dancing where payment is made for admission should be allowed in that area after a specified time on Sundays.—[Mr. Merlyn Rees.]

10.55 p.m.

Sir Cyril Black: I believe I can be entirely uncontroversial in what I say on this Motion. The situation, I understand, is that this Money Resolution would provide for the expenses of a local option poll in Wales to be met in the event of the Sunday Entertainments Bill, which begins in Committee on Thursday, passing into law in its present form.
First, the House is almost exactly equally divided in regard to the Bill. Second, I understand that the Government have made clear that they take an entirely neutral view of the Bill and regard it as one for hon. Members themselves to decide upon. There is an Amendment on the Notice Paper, which will in due course be considered by the Committee, to extend the right of local option poll regarding Sunday entertainments to England in the same way as the Bill would make provision for local option in Wales and Monmouthshire. It is possible that, in its wisdom, the Committee—and, later, the House—will decide that it is right to extend local option in England as well as to Wales and Monmouthshire. My question is this: why

is England not covered by the Money Resolution?

10.56 p.m.

The Under-Secretary of State for the Home Department (Mr. Merlyn Rees): The hon. Member for Wimbledon (Sir C. Black) is right to say that the Government are neutral in this matter. We have not yet discussed it, and we are to begin this week. He is right also to direct attention to Clause 5 of the Bill, which, as he knows, since he has been concerned in these matters for a number of years now, is modelled on the provisions of the Licensing Act, 1964.
Polls will be held only at the request of the local government electors. It is impossible to make an accurate assessment of the expenditure which might be involved. If polls were held this year in every county and county borough in Wales and Monmouthshire, the cost could be estimated at between £50,000 and £100,000; but polls held in subsequent years would not necessarily be so costly.
The cost of the polls is included in the general expenditure of local authorities qualifying for rate support grant. I realise that the hon. Gentleman is concerned about England, but I should like to state the general position. The total amount of rate support grant is fixed by order two years in advance of the year in which it is payable, and it cannot be increased save in special circumstances, which would not apply in this case.
There will, therefore, be no increase in overall Government expenditure. What it boils down to is that local authorities which have a poll will have to meet the cost within their present expenditure, except that in Wales they can draw on the resources element because most of Wales has a less than average rate per head. So the first point is that there is no additional expenditure as a result of doing it, and the Bill as it stands at present deals only with Wales in this respect.
As to the precise question which the hon. Gentleman asked, the Financial Resolution must refer to the Bill as it stands. If the Bill is amended at a later stage, the Financial Resolution will itself need amendment later on.

Sir C. Black: Sir C. Black: I am much obliged to the Minister.

Question put and agreed to.

Resolved,
That, for the purposes of any Act of the present Session to make, in place of certain statutory provisions relating to Sunday observance and the playing of games, provision, in relation to Sunday, for preventing payments being made in certain circumstances in the case of certain spectacles taking place during certain hours, it is expedient to authorise the payment out of moneys provided by Parliament of any increase in the sums payable out of moneys so provided in respect of rate support grants to local authorities in England and Wales which may arise from the inclusion, in the expenditure relevant to the fixing of the aggregate

amount of those grants, of expenses incurred under the said Act of the present Session by a local authority in Wales or Monmouthshire in connection with the holding of a local poll to determine either whether sports and games where payment is made by spectators should be allowed in the area of the authority after a specified time on Sundays or whether public entertainments and dancing where payment is made for admission should be allowed in that area after a specified time on Sundays.

ADJOURNMENT

Resolved, That this House do now adjourn.—[Mr. Harper.]

Adjourned accordingly at one minute to Eleven o'clock.